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J.D. Power to Be Bought by McGraw-Hill

Times Staff Writer

Consumer research firm J.D. Power & Associates, best known for its automotive quality surveys, said Monday that it would be sold to information media giant McGraw-Hill Cos., which owns corporate credit rating service Standard & Poor’s and Business Week magazine.

Terms of the deal were not disclosed. Westlake Village-based Power has been on the block for about six months and its market value has been estimated by analysts at as much as $400 million.

For the record:
12:00 AM, Mar. 10, 2005 For The Record
Los Angeles Times Thursday March 10, 2005 Home Edition Main News Part A Page 2 National Desk 2 inches; 72 words Type of Material: Correction
Market research firm -- An article in Tuesday’s Business section about the sale of the automotive market research firm J.D. Power & Associates said the buyer, McGraw-Hill Cos., had $53 billion in revenue last year. McGraw-Hill’s revenue was $5.3 billion. The article also said that Stephen Goodall, J.D. Power’s president and chief executive, had been hired last year from ACNielsen Corp. In fact, Goodall has been with J.D. Power for 26 years.

The sale is expected to close in April.

Privately held Power’s most celebrated products are its customer satisfaction surveys on auto manufacturers, their vehicles and dealers. The results are widely cited in automakers’ advertising campaigns. Although its automotive studies made its name, Power also does research for the construction, energy, financial services, airline and health services industries.

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The acquisition is part of McGraw-Hill’s strategy to diversify into businesses that aren’t as dependent on advertising.

Power is a profitable company that operates under long-term contracts with most of its clients. “It will enhance our growth prospects for our business information platforms,” said Harold McGraw III, chairman, chief executive and president of McGraw-Hill.

Publicly traded McGraw-Hill reported $53 billion in revenue and $788.3 million in net income last year. It publishes magazines and trade journals in many of the same fields in which Power works.

Last fall Power hired New York financial advisor Evercore Partners Inc. to help devise a speeded-up global expansion plan. “McGraw-Hill will give us resources, experience, reach and market access that we didn’t have,” said Tom Shaver, a senior partner at Power. “It will give us the opportunity to develop new products.”

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The firm was founded in 1968 by market researcher J. David Power III, who previously had worked for Ford Motor Co. and General Motors Corp.

The company has 787 employees in five offices in the United States and seven overseas.

Power, 73, will step down as chairman of the company when the McGraw-Hill deal is completed, but will remain active in strategic planning, Shaver said. No other significant management changes are expected. Steven Goodall, a former ACNielsen Corp. executive who joined Power in November, will remain president and CEO of the research firm, Shaver said.

McGraw-Hill plans to tuck Power & Associates into its information and media services unit, under division president Scott Marden.

In addition to Business Week, the unit publishes Aviation Week magazine and a number of journals and information resource guides for the engineering, construction, architectural, energy and healthcare industries. It also operates four ABC network affiliated television stations in San Diego, Bakersfield, Denver and Indianapolis.

“Power will bring a strong new dimension to our business,” said Steven Weiss, vice president for corporate communications at McGraw-Hill. “We know about the business-to-business world, but Power will bring an important direct link to the consumer,” he said.

Word of the deal was released as the markets opened Monday. McGraw-Hill shares fell 51 cents to $95.40 on the New York Stock Exchange.


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