Some of the pioneers of modern business -- such as Ray Dolby of Dolby Laboratories
The latest is J.D. Power III, age 73. He did not opt for the IPO exit. With $150 million in sales and muted growth prospects as a stand-alone entity, selling out made more sense. So, yesterday, McGraw-Hill
Every year, J.D. Power surveys millions of consumers and business customers to gauge consumer satisfaction. The firm covers a variety of industries, such as automotive, commercial vehicles, telecommunications, travel, real estate, and finance. The company is most known for its ratings of automakers, and about two-thirds of the company's revenues derive from this sector.
McGraw-Hill is a global information services provider. In fact, it has built its operations through aggressive acquisitions. Its brands include Standard & Poor's and BusinessWeek.
And, no doubt, J.D. Power will be a great brand to add to the portfolio. After all, McGraw-Hill is known for independent ratings, and the J.D. Power brand will allow it to expand into new verticals. For example, McGraw-Hill has publications for construction, energy, aviation, and health care, and J.D. Power's offering could be used to deliver expanded, or new, services to customers in those channels. McGraw-Hill also has extensive marketing dollars and global reach to help leverage the J.D. Power brand.
Much of the revenue base for McGraw-Hill is advertising. While there has been an uptick in this market, McGraw-Hill would like to focus on the more stable subscription-based revenues (this is the primary revenue model for J.D. Power).
In fact, last week McGraw-Hill purchased Vista Research, an independent research firm that caters to money managers and hedge funds. Its revenue model is also subscription-based.
But the deal-making means a short-term negative. As announced today, McGraw-Hill's acquisitions will dilute 2005 annual earnings per share by $0.06 to $0.07. On the news, the stock fell $3.79 to $92.06. But, as its history testifies, McGraw-Hill is not about making a quick buck. It no doubt wants to be around and strong for many years to come.
Fool contributor Tom Taulli does not own shares mentioned in this article.