Baker & Taylor, Inc.

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Baker & Taylor, Inc.

2709 Water Ridge Parkway
Charlotte, North Carolina 28217
U.S.A.
(704) 357-3500
Fax: (704) 470-7860

Private Company Incorporated: 1992 as Baker & Taylor, Inc.
Employees: 2,500
Sales: $900 million (1995 est.)
SICs: 5099 Durable Goods, Not Elsewhere Classified

A solid and respected leader in its field, Baker & Taylor, Inc., operates as the holding company for two companies involved in the entertainment and information services business, Baker & Taylor Books and Baker & Taylor Entertainment. During the mid-1990s, Baker & Taylor Books supplied books, spoken-word audiotapes, calendars, and related information services to more than 100,000 bookstores, schools, public, university, and special libraries, and government agencies worldwide, conducting its international business through Baker & Taylor International, Ltd. The other primary component of the holding company, Baker & Taylor Entertainment, supplied videocassettes, compact discs, audiocassettes, interactive games, CD-ROM, personal computer software, and related services and products to nearly 30,000 retailers and libraries in the United States.

When Baker & Taylor, Inc. was organized in 1992, Gerald G. Garbacz hailed its formation by proclaiming “the beginning of a new era” for the company. For those not familiar with the Baker & Taylor name, Garbacz’s utterance seemed an obvious statement, considering that Baker & Taylor, Inc. was embarking on its inaugural year of business. But as chairman and chief executive officer of the newly formed company, Garbacz was intimately familiar with the Baker & Taylor name, having spent the previous 18 years working for Baker & Taylor Books, the nucleus of the fledgling holding company, Baker & Taylor, Inc. Throughout Garbacz’s tenure at Baker & Taylor Books, the company and its sister distribution businesses, Baker & Taylor Video and Baker & Taylor SoftKat, had been owned by W. R. Grace & Co., a massive conglomerate with wide-ranging business interests, that, according to Garbacz and other senior executives, had been stewarding the Baker & Taylor businesses in aberrant directions. The years of frustration came to an end in 1992, however, when W. R. Grace & Co. sold the Baker & Taylor businesses, marking the beginning of what Garbacz and his management team hoped would be a new, more positive era in the company’s history.

19th Century Origins

For Baker & Taylor Books, the change in ownership in 1992 represented the latest chapter in a corporate history that stretched back more than a century and a half before Garbacz took control of the company in the wake of W. R. Grace & Co.’s divestiture. The business had been founded by David Robinson and B. B. Barber in 1828, beginning its corporate life as a small bindery and subscription book publisher in Hartford, Connecticut. A short time later, Robinson and Barber opened a bookstore to distribute their own books and other publishers’ books. After establishing a solid position in Hartford, the two businessmen moved their flourishing concern to New York City in 1835. During the ensuing years, the focus of the company’s business shifted from publishing its own books, instead stressing the distribution of other publishers’ books. The company was relying on this type of business to fuel its growth by the time its ownership was passed to the two men whose names would become synonymous with book distribution in the 20th century. In 1885, exactly 50 years after the relocation from Hartford to New York City, James S. Baker and Nelson Taylor purchased the company founded by Robinson and Barber, lending their surnames to a concern that would bear the Baker & Taylor name for more than the next century.

In terms of business focus, James Baker and Nelson Taylor did not alter the direction of the business they acquired from Robinson and Barber until 1912, when they abandoned publishing entirely and instead directed the company toward wholesaling. In the decades ahead, Baker & Taylor would establish itself as a prodigious competitor in its new business, becoming a familiar name to librarians and bookstore owners across the country who purchased books from the venerable wholesaler. In 1958, Baker & Taylor was purchased by Parents Magazine, remaining under its control until W. R. Grace & Co. acquired the company in 1970 and touched off a period in the company’s history that insiders would later characterize as difficult years.

1970 Acquisition by W. R. Grace & Co.

When Baker & Taylor joined the W. R. Grace & Co. fold, it joined a host of other businesses that operated under the expansive corporate umbrella of the diversified conglomerate. W. R. Grace & Co.’s corporate reach was broad, including a wide range of business interests that ran the gamut from Baker & Taylor’s book wholesaling business, to the manufacture of oil rigs, to the marketing of bull semen. Positioned within this eclectic array of businesses, Baker & Taylor, to a certain degree, was lost in the wash. The company struggled to assert itself amid its parent company’s diverse business interests, but as the years of W. R. Grace & Co.’s ownership wore on, its business began to suffer. Librarians, who had relied on and trusted the Baker & Taylor name for more than a century, began to reassess their opinion of the book wholesaler, and, as a result, the company gradually developed a reputation among its customers for inconsistent service. Changes were needed, but it would be years before Baker & Taylor’s management could direct the company as they saw fit and enter into a new era without the influence of W. R. Grace & Co.

Garbacz witnessed the effects of W. R. Grace & Co.’s ownership of Baker & Taylor firsthand, joining the book wholesaler in 1974, four years after its acquisition by the diversified conglomerate. By 1980, Garbacz had risen to the position of president, a post that provided him with a revealing vantage point from which to evaluate the company’s operation under W. R. Grace & Co. Garbacz would later say during an interview with Library Journal that W. R. Grace & Co.’s management “placed a great deal of emphasis on short-term financial performance with very little emphasis on the development of markets and human resources,” chiding the parent company’s approach to sustaining Baker & Taylor’s long-term vitality. In spite of the damage done to the book wholesaler’s reputation during the 1970s and 1980s, however, there were some positive aspects to W. R. Grace & Co.’s 22-year reign of control. It was while under the management of W. R. Grace & Co. that Baker & Taylor became a more diversified business, gaining, through acquisitions engineered by W. R. Grace & Co., two new facets to its long-established business of wholesaling all types of books. With the addition of these two sister distribution businesses, which extended the Baker & Taylor name into the computer software and videocassette distribution arenas, the foundation for the future Baker & Taylor, Inc. was created, engendering the well-rounded information and entertainment concern that existed in the 1990s.

The two companies that along with Baker & Taylor Books would compose Baker & Taylor, Inc.’s holdings during its inaugural year of business were Baker & Taylor Video and Baker & Taylor SoftKat, involved in videocassette distribution and computer software distribution, respectively. Baker & Taylor Video’s roots extended back to 1975 when Chicago-based Sound Unlimited was founded. The company, which lengthened its name in 1979 to Sound Video Unlimited, operated as a regional wholesaler of videocassettes, helping pioneer the distribution of videocassette programming in VHS and BETA formats before being acquired, along with another video-cassette distribution company, VTR Incorporated, by W. R. Grace & Co. in 1986. Sound Video Unlimited and VTR were then merged, forming Baker & Taylor Video, the largest full-line videocassette distributor in the United States. The establishment of Baker & Taylor Video in 1986 coincided with the acquisition of another company by W. R. Grace & Co. that would later become an integral part of Baker & Taylor, Inc. when it emerged in 1992. In 1986, W. R. Grace & Co. acquired SoftKat, a computer software distribution firm founded in 1983 during the early years of the personal computer industry. Personal computers, in subsequent years, would become ubiquitous fixtures in homes and offices, while the demand for video-cassettes would burgeon as well, giving Baker & Taylor Books two solid counterparts within W. R. Grace & Co.’s corporate structure.

The years spent under W. R. Grace & Co.’s management also strengthened Baker & Taylor’s business in other areas, particularly in international markets. Although Baker & Taylor had crossed U.S. borders just before its acquisition by W. R. Grace & Co., operating its distribution activities in foreign countries through offices in Somerville, New Jersey, the company’s international business was bolstered considerably while under the ownership of W. R. Grace & Co. Sales offices were opened in Australia and Japan in 1983 and 1986, respectively. Then, following the 1989 acquisition of Feffer & Simons, which operated as an international publishers’ representative, Baker & Taylor International, Ltd. was formed, providing Baker & Taylor Books with a corporate conduit to extend its wholesaling services to international markets.

The formal establishment of an international division in 1989, coupled with the acquisition of videocassette and computer software distribution companies, made Baker & Taylor a diversified competitor in the distribution business, certainly more so than when the company was first acquired by W. R. Grace & Co. in 1970. But its diversity also educed the harshest criticism of W. R. Grace & Co.’s management by Baker & Taylor executives. Garbacz cited W. R. Grace & Co.’s central failure as the company’s decision to operate the Baker & Taylor businesses as separate entities, reflecting to a Library Journal reporter that “there was a very large element of uncertainty under Grace; they didn’t want the various units of B&T working together as closely as [Baker & Taylor management] wanted.” This point was reiterated by another Baker & Taylor executive, who told Publisher’s Weekly, “When we were owned by Grace, all three divisions operated as very separate, very independent companies with little or no interaction.”

1992 W. R. Grace & Co. Divestiture

For those disenchanted with the manner in which the Baker & Taylor businesses were managed under the auspices of W. R. Grace & Co., welcome news arrived in November 1991 when the diversified conglomerate announced its intention to sell its Baker & Taylor subsidiaries. Several months after the announcement, in early 1992, ownership of the Baker & Taylor businesses was passed to a group of Baker & Taylor management and The Carlyle Group, a private, Washington, D.C.based merchant banking and investment firm whose specialty was acquiring businesses from large conglomerates. Like W. R. Grace & Co., Carlyle’s business interests were diverse, including companies involved in real estate, airline catering, chemicals, aerospace, and commercial and military aircraft manufacturing. Unlike W. R. Grace & Co., however, Carlyle’s management of the Baker & Taylor businesses met with the approval of Garbacz and his management team, ushering in the beginning of a new era for both Garbacz and Baker & Taylor.

The acquisition of the various Baker & Taylor businesses by Carlyle also engendered the formation of Baker & Taylor, Inc., which was organized in March 1992 as a holding company for Baker & Taylor Books, its distribution divisions, Video and SoftKat, and Baker & Taylor International, Ltd. Leading the newly formed Baker & Taylor, Inc. during its inaugural year of business was Garbacz, who was named chairman and chief executive officer of the company, in addition to his duties as the top executive of Baker & Taylor Books. Under Garbacz’s stewardship, the Baker & Taylor units were governed in a decidedly more concerted manner than during the W. R. Grace & Co. years. The company’s corporate culture was revamped and its focus was altered, transforming Baker & Taylor into an information and entertainment services firm rather than a company purely focused on distribution. As part of these changes, Baker & Taylor’s software division, SoftKat, underwent a name change in 1992, becoming Baker & Taylor Software. The following year, Baker & Taylor Software, which dealt in educational and entertainment computer software, was combined with Baker & Taylor Video, a supplier of videocassettes and music recordings in both cassette and compact disc formats, to form Baker & Taylor Entertainment.

When Baker & Taylor employees reported for work on May 16, 1994, they heard surprising news. Chicago-based Follett Corp., a distributor of books, textbooks, and computer software to the school library market, had announced its intention to acquire Carlyle’s 92 percent stake in Baker & Taylor, Inc., setting the stage for another new era in the company’s history. With three divisions that operated in business areas similar to those of Baker & Taylor and another three divisions involved in markets not served by Baker & Taylor, Follett struck industry pundits as a good match for the units composing Baker & Taylor, Inc., an acquisition that would combine the $800 million in annual sales generated by Baker & Taylor, Inc. with Follett’s $650 million in annual sales. Negotiations between family-owned Follett and Carlyle were conducted throughout the rest of May, continuing on into June, but were called off in the middle of the month after several weeks of discussions failed to yield a final agreement between the two companies.

In the wake of the aborted sale, Carlyle announced that it would return to supporting Baker & Taylor’s long-term strategy of upgrading its systems and achieving greater efficiencies through the consolidation of the company’s operations, but the majority owner of the book, entertainment, and software distributor did make one important change. Slightly more than a week after the Follett deal fell through, Carlyle executives ordered sweeping changes in Baker & Taylor’s top management, replacing Garbacz, who officially resigned as chairman and chief executive officer of the company, with three individuals, Patrick Gross, Joseph Wright, and Craig Richards. With Garbacz gone, it was up to Gross and Wright, who jointly served as the company’s chairman, and Richards, who was named chief executive officer, to lead Baker & Taylor through its new era of business, as the venerable company moved toward its third century of business.