Has O'Callaghan got what it takes to top the Terminator?
THIS has been a particularly difficult year for Barry O'Callaghan, who turned 40 last May, just weeks after the 'Sunday Time's had pushed the publishing magnate from seventh place to 21st in its annual rich list. It calculated that his personal fortune had shrunk by €900m over the previous 12 months.
This week, the former billionaire was one of the investors involved in a High Court action against property developer Bernard McNamara in an attempt to recoup money lent to redevelop land in the Dublin suburb of Ringsend. However, the problems there are small beer compared to those at the heavily indebted US-based publishing company which is O'Callaghan's day job.
Few Irish businessmen have flown so high or so fast as Barry O'Callaghan, who made a fortune by exploiting his detailed knowledge of the financial markets to borrow vast amounts of money and turn a small, Dublin-based software publisher into one of the world's largest publishers. It counts names such as Philip Roth and JRR Tolkien within its stable of authors.
The question people are now asking, however, is whether this intense and driven man, who excelled at rugby but stumbled into business by chance, expanded too quickly and took on too much debt just as the credit crisis began.
The Mitchelstown, Co Cork, native was educated at Clongowes, the expensive Jesuit-run alma mater of Michael O'Leary and David Dilger. O'Callaghan captained the school's senior cup team while rugby pundit George Hook was coach. Later, he played for Trinity College, Dublin, where he studied law in the late 1980s and met his wife, Geraldine McGeough. They have three daughters.
In a rare interview, the doctor's son once described himself as "a professional middle-class boy, likely to do well in his Leaving Cert". He added that he only ended up in investment banking because he didn't know what to do afterwards but knew that it definitely wasn't law.
"We did the milk round, where all these banks show up on campus. You'd listen to some boring fart for half-an-hour and then there was a free bar. I didn't even know what an investment bank was. A bank, to me, was a place where you get a mortgage and traveller's cheques."
He quickly prospered, moving from Morgan Stanley in London to Hong Kong. From there, he went to New York with Salomon Smith Barney -- just as the technology bubble began to inflate.
While he succeeded in banking he was weary of the work culture. "They work you to the bone and it's a question of who is willing to sacrifice all else. It's full of dysfunctional, on-their-fourth-marriage-type people and it doesn't afford you a normal lifestyle," he recalled.
Shunning this lifestyle, the then 28-year-old O'Callaghan quit Credit Suisse First Boston in 1999 to become chief executive of educational-software company Riverdeep, which had been founded four years earlier by Pat McDonagh, a former teacher turned encyclopedia salesman. The two men had met when McDonagh asked O'Callaghan for advice on the future of Riverdeep.
The move into educational software and back to the south Dublin suburb of Blackrock was a turning point for O'Callaghan, who proceeded to turn Riverdeep from minnow to giant by floating the company. Later, he took the company private again and borrowed money from the markets to snap up much larger rivals.
His first move was the flotation of Riverdeep in New York and London -- a decision that gave O'Callaghan a personal fortune of around $36m by the time he was 30.
Riverdeep's fortunes were mixed as the technology bubble waxed and waned and O'Callaghan became one of the first (but not last) Irish businessmen to rant against hedge funds. However, Riverdeep survived because it was selling something that people wanted in good times and bad -- education -- and support from serious Irish investors, such as ex-Anglo Irish Bank chief executive Sean FitzPatrick and Domhnall Slattery's Claret Capital.
Despite this success, O'Callaghan still wanted more and he moved into the old-fashioned world of publishing by snapping up a series of small companies and then two very big companies -- US publisher Houghton Mifflin, which he bought for $1.75bn, and Reed Elsevier's US schools' publishing business, which he bought for $4bn eight months later, creating a single behemoth which he called Houghton Mifflin Harcourt. These deals made him a major player in US publishing.
Decisions to drop some leading US authors from Houghton Mifflin's lists were criticised by the arts world while many in financial circles fretted that he had taken on too much debt at exactly the wrong time.
O'Callaghan himself appeared to agree, trying to sell the Houghton Mifflin Harcourt unit early last year but pulling the sale after failing to get the price he wanted, despite receiving three offers. Late last year, he rebuffed a bid from German publishing giant Bertelsmann to take a stake.
The irony of O'Callaghan's career is that he made his name and fortune by investing in risky new software but has run aground by reinvesting that money in old-fashioned books, just as California's governor, Arnold Schwarzenegger, said he wants to remove textbooks from schools because "there's no reason why our schools should have our students lug around these antiquated, heavy and expensive textbooks".
Many investors now fear that the market for textbooks in the US could be terminated sooner rather than later. Whether the ex-movie-action hero or the former hero of Clongowes rugby is right remains to be seen.