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How publishing partnerships are taking on Amazon

13 January 2014

Business partnerships come in all shapes and sizes, from two unknown individuals to a pair of the most recognisable companies in the world.

Back in 2012, publishers Penguin and Random House agreed a joint venture that they are hoping will challenge the dominance of Amazon in the book market. A September 2013 survey suggests Amazon has 79% of the UK e-book market cornered, and this is something that the big publishing houses are looking to break.

London-based Penguin and New York’s Random House completed their full merger in July 2013, with the former taking 47% of the business and the latter 53%.

This allows them to combine their illustrious reputations and legacies to form something of a super-brand in the world of publishing. Between them, Penguin Random House now deals with work from around 70 Nobel Prize laureates and hundreds of the world’s best loved writers.

A carefully planned partnership

The eight months between initially announcing a joint venture and confirming a full merger shows how seriously both sides took this partnership. Indeed, it is thought Rupert Murdoch was planning a $1 billion offer for Penguin even as the Random House deal was ongoing.

Full details of the merger show that the board reflects the division of ownership within the new company. Bertelsmann, which is in charge of Random House, elected five directors, while Penguin owner Pearson selected four.

The company headquarters was established in New York, and the combined workforces of Penguin and Random House now amount to 10,000.

Stipulations within the contract show that each company has made sure it is protected, and that separate ventures can continue uninterrupted. Neither can sell any of its stake for three years, and after five years either can request an IPO.

The deal also does not include Bertelsmann’s German trade publishing, and Penguin will retain the right to feature its brand on educational materials around the world.

The contractual intricacies and bold goals of this agreement show that a business partnership or joint venture of any kind is not something which should be entered into lightly, but it also shows that through careful planning it is possible to make a real impact.

If you are thinking of setting up a partnership, speak to Ralli Solicitors on 0808 149 1552 for help and legal advice.

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