A Note from the President

Many of you may be watching the battle for PGW between Perseus and National Book Network. We are certainly keeping a close eye on it and find it very interesting. I thought you might like to know where IPG stands.

Although initially intrigued by the prospects, IPG has decided not to make an offer for PGW for several reasons. First and foremost, the disruption it would cause for our staff and our clients might result in a slippage of service to our existing clients and customers. We feel that the way to grow a distributor is not to see how many clients we can sign up but to offer a tremendous value for an important service, to continue to help grow the business of our client publishers, and to be selective with whom we work. We have acquired companies in the past and have always examined them from two main angles: what can we bring to improve their existing business, and what can they bring to improve our existing business. The recent addition of Trafalgar Square Publishing brought to IPG a list that complimented rather than duplicated our existing titles and will help us continue to open new specialty accounts and achieve economies for our trade accounts and greater sales for all of our publishers. It broadens our already long reach into specialty stores and helps us open many more accounts in the gift market. While we feel we could give PGW titles more coverage in specialty, library, and academic markets, as well as consistently better warehousing and customer service, we don’t see that an acquisition would bring to IPG much more than additional titles. Strategically, there isn’t a compelling reason to combine the two companies.

Having done it with Trafalgar, we know what it takes to integrate two systems and to introduce many thousands of new titles to our distribution center in a short amount of time. We are proud of having absorbed Trafalgar without even a minor interruption in the selling and shipping of IPG titles. What made it easier was the fact that both Trafalgar and IPG used the same inventory software and we were able to convert data from one to the other without a lot of manual labor. As far as I know, PGW does not use the same software as NBN and Perseus. The complexity of this type of project can be easily underestimated by upper level executives such as me, yet the stakes are high. Also, we had space in our distribution center to handle the added inventory.

The offer of $.70 or $.85 on the dollar to publishers for income lost is expensive and we think a bad investment for the purpose of growing so quickly. It might take three or four years to begin to break even and we feel that a move such as this combined with an unexpected downturn in business could put substantial pressure on the company and that it would not be responsible to our client publishers. We are not willing to risk the financial health of our company and our publishers and do not need to do so in order to survive and thrive. We aren’t interested in positioning the company for a public offering. IPG will not be at a disadvantage in the market if either of these companies is larger than IPG. We have a strong record of attracting smart publishers and of steady growth, and we are confident we offer the best value for distribution services in the industry. We have already signed up a few publishers that were with or were considering PGW and we are declining to work with others. Although we were projected to be the second largest distributor this year, up from the number three spot, we’re happy to remain third largest and the healthiest financially. IPG will continue to accept less than two percent of the publishers that approach us for distribution. We currently have no outside debt and have no interest in bringing on outside investors that could insist on changes that benefit their investment without regard to yours. We will continue to invest wisely in our company for the mutual benefit of IPG and our publishers, but will resist putting in danger the finest distributor and publishers in the industry.

Mark Suchomel
President
Independent Publishers Group