New York City based McGraw-Hill Financial recently agreed to sell its customer satisfaction survey provider, J.D. Power for $1.1 bln to London-based private equity firm, XIO Group. The deal is expected to close in the third quarter of this year.
Last week McGraw-Hill Financial agreed to the deal offered by investment firm XIO Group to purchase auto ratings and customer satisfaction survey data provider J.D. Power for $1.1 bln. XIO Group outbid rival private equity firm Advent International Corp.
J.D. Power, based in Costa Mesa California, currently employs approximately 700 analysts, statisticians, and consultants in 12 offices globally, and is expected to generate $350 million in revenue in 2016.
“We are very pleased with this outcome. The transaction represents good value for our shareholders and positions J.D. Power for continued success,” said McGraw Hill president and CEO Doug Peterson in a statement.
The J.D. Power acquisition is the first U.S.-based acquisition for XIO Group, which was founded in 2014 and has $5.0 bln in assets under management, including capital from many large Asian investors. XIO’s expertise is to buy companies and help them expand their footprint in fast-growing markets in Asia.
More About J.D. Power
J.D. “Dave” Power and his wife Julie started the firm in 1968 from their home in Calabasas, Calif., eventually landing Toyota Motor Corp. as their first client.
While J.D. Power’s roots are in auto research, the firm expanded its business to conduct and market annual customer satisfaction surveys for a range of industries, from credit cards to hotel loyalty programs and cable companies.
McGraw Hill Financial acquired J.D. Power in 2005 for an undisclosed sum.
Rationale for the Transaction
Clearly, McGraw Hill Financial has been trying to sell off businesses it deemed were not core to its strategy so it could focus on the markets it wanted to serve. Over the past few years, McGraw-Hill has sold off its divisions which produced textbooks, trade publications, and magazines.
Last October, when McGraw Hill said it would explore alternatives for J.D. Power, management explained this shift in company focus, “we have increased our focus on capital and commodity markets and believe that J.D. Power could be more valuable to a company in the market research and consumer analytics space.”
This shift from a broad publisher to a financial data / information firm has also been clear in the firm’s acquisition strategy as it purchased SNL Financial LLC in 2015 from New Mountain Capital LLC for more than $2 billion.
Given XIO’s connections in Asia and J.D. Power’s strategy of expanding its customer satisfaction survey business into other markets, we would not be surprised to see numerous growth opportunities for the firm.
J.D. Power has hinted that it might expand its presence in the mobile technology and digital communications sectors. However, the firm would clearly enhance its business opportunities by adding the ability to surveying more local Asian consumers and market to Asian companies.
McGraw-Hill Financial, on the other hand, is likely to continue its steady march to recast itself as a financial data company by shedding additional noncore assets and acquiring new interesting properties. This is consistent with McGraw-Hill’s plan to rename and rebrand itself S&P Global on April 27th.