Wednesday, November 05, 2008

Reed Name Smith as CEO Designate

Ian Smith has been named to replace Sir Crispin Davis as CEO of Reed when Davis retires early next year. Smith will join Reed in January. Who is he? Well, he has no media experience for a start and comes most recently from the construction company Taylor Woodrow. During his short tenure at TW, he apparently engineered a very large merger with competitor George Wimpey which has lead many to speculate that Reed's board is focused on a mega-merger of its own once the recent Choicepoint acquisition is decided.

As the primary reason for the hire, the association with deal making could be tenuous because Davis engineered a number of large deals during his tenure. As examples, the acquisition and subsequent divestiture of Harcourt, the acquisition of ChoicePoint and the protracted divestiture of RBI. In addition, if the Reed board were looking for a pure deal maker then there would have been any number of media experienced private equity players who could have fit the bill. Nevertheless, without any other logical connection to the Reed business, this is what most reporters are focused on. This argument also allows them to discuss the long protracted idea that bringing Wolters Kluwer and Reed Elsevier together would make great sense. Perhaps for WK but not as much for Reed in my opinion.

In my view, I think the ChoicePoint acquisition is a better indicator of the type of acquisition strategy that Reed may follow. They want to own distinct verticals and to play in these verticals they plan to acquire the biggest player to achieve immediate scale. I think WK may actually be too small for what they may be considering. For example, they don't have a presence in the Financial sector: would they see Bloomberg as a target? Remember they compete with Thomson Reuters in several areas and Thomson has a big financial information business. Wider afield, Reed may be looking internationally to acquire very large information companies that will broaden their current offerings into both mature and developing markets.

One other interesting aspect of the hiring of Smith is what the board must be thinking about the crop of senior executives below Davis. Some of these executives have extraordinary experience both with RE and with other publishing companies. Several (at least three senior executives are in their mid-late 40s to very early 50s) so perhaps the board didn't feel one of these executives was more ready than their colleagues (or they were not willing to risk upsetting the apple cart by promoting one of them). The board may have decided to wait six years or so to make their choice from this crop of executives to choose the next CEO to replace Ian Smith.


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