April 15, 2014

Apollo Considering Selling Off Professional Arm of McGraw-Hill Educational

Less than a year after purchasing the struggling textbook, reference, and professional business of McGraw-Hill (now known as McGraw-Hill Financial), the private equity firm Apollo Global Management (AGM) may be looking to slim down its purchase. Reports indicate the management group is shopping the professional components of McGraw-Hill Educational (MHE), which focuses on publications and digital resources for workers looking to improve their skills and continue their education.

Earlier this year, AGM purchased MHE, which was formed in 2012 when the publisher decided to build a fence between its educational division, which publishes textbooks and other educational resources for kindergartners and college students alike, and its financial information arm. Securities & Exchange Commission (SEC) filings regarding the decoupling of the companies suggested the educational portion of McGraw-Hill’s business had been struggling in recent years. The company posted a $200 million profit in 2010; by the end of 2012, it represented a $62 million loss for the company. Separating the textbook business from the company’s financial information arms, which include the credit-rating agency Standard & Poors, set the stage for MHE to be acquired by AGM early this year, for around $2.5 billion. As part of the deal, the original company changed its name to McGraw-Hill Financial.

The move marked a refocusing of both businesses, allowing MHE to drill down on educational services, said spokesperson Brian Belardi. “One hundred percent of the investment in the company now goes to education,” Belardi said. Since the sale, MHE has set up a new research and development hub in Boston and acquired the e-learning resource company ALEKS in June, moves Belardi said the company wouldn’t have been able to make while dividing its attention between education and financial services.

A potential sale of McGraw-Hill Professional–which focuses on learning tools for mid-career professionals looking to hone their job skills or garner new certifications, rather than traditional textbooks and school resources—would likely include the subscription-based medical reference service AccessMedicine, which provides medical students and doctors around the world with access to resources like Harrrison’s Principles of Internal Medicine, as well as annual publications like Current Medical Diagnosis and Treatment. The professional wing also produces both print and digital study guides for tests like the GRE and SAT, as well as language resources and some of the company’s textbooks for subjects like engineering and business.

According to the company, the potential sale of McGraw-Hill Professional was brought about less by a desire to shed the properties, than as a response to some interested suitors. In a statement on the company’s website, Belardi said in part:

MHE isn’t the only textbook provider testing market waters at the moment. Publisher Houghton Mifflin Harcourt (HMH) filed plans to go public with the SEC earlier this year. But the state of the industry is by no means rosy, as was demonstrated earlier this year when textbook and education resource publisher Cengage went into bankruptcy. State governments and universities alike have taken aim at rising textbook prices, with open source and digital alternatives have putting traditional publishers under increasing pressure to provide more value in their products. California has created an open source textbook library to control costs for the 50 most popular courses at state colleges, while Washington State has introduced digital open source textbooks for community colleges.

Ian Chant About Ian Chant

Ian Chant is the Associate News Editor of LJ.

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Comments

  1. Ian,
    You are indeed correct that universities are looking to open sources options to provide alternatives to their students due to the outrageous prices of textbooks and the tactics that publishers are taking to eliminate the low cost used book market.

    You should write an article about McGraw-hills unprecedented push to move students to only an all digital choice. McGrawhill actually has a countdown clock marking the elimination of all print material. The true motives of McGraw-Hill and their President “Brian Kibby” on their quest to ensure that all students have to purchase a digital code ( too read the course content , complete their homework, or to pass their class). It’s an appalling approach to ensure profits for a billion dollar corporation that is attempting to make a major profit on every student attending higher education.

    You could also focus on writing a story on the lack of diversity at McGraw-Hill education. McGraw-Hill wants to make huge profit from Black, Asian, Latino students and professors but do not practice or embrace diversity within the McGraw-Hill’s culture or company. The 200+ individuals that make up the management team for the Higher Education division, only has 1 African American and 1 Latino in its ranks! Write about this!
    If colleges and universities are going to be forced to buy only digital products from McGraw-Hill then schools should take a long hard look at using their schools Learning Management System and look for alternatives in the open source market or reach out to Bill and Melinda Gates Foundation for assistance! Let’s review a timeline and history of Higher Educations approaches of ensuring profits and destroying the used book market. First Publishers began republishing a new edition every 3 years even though there were many times no changes or updates ( how do you change a math book every 3 years when there is no new formulas or content ,,, for god sake Math is Math) although all books change every 3 years. Currently there are texts on 2 year revisions ( no discipline has that amount of new research to warrant a new text). Then publishers began to package a DVD, CD, or a supplemental material that had zero value to ensure students had to purchase a new text package. When professors and bookstores figured out what publishers where doing , then the publishers switched tactics to asking the professors to create custom content ( basic homework assignments, instructions or school policies) and the publisher pays a royalty to that professor anywhere from $1 to $12 per new text sold too ensure that the professor requires the text be purchased by every student. Sometimes entire departments are given royalty payments if they require material that can only be found in a new package that has to be purchased from a publisher. Now that all publishers are paying Professors and department Royalties, how does a publisher win new business??? The competing publisher has to offer a higher Royalty… Now the Payoff game begins! What happened to the best course content being chosen for the students needs and not too make a profit by publishers, professors and departments? Now that each publisher is being forced to pay out more and more money to win new business or keep existing business, what is the most logical progression in this process? All digital… That’s right eliminate any chance for a student to pass their course by completing the homework or required assignments on anything other than within a publishers domain… What happened to writing an homework assignment on paper and receiving my grade? Although digital has its payoffs in education it should not be solely for a profit!

    • James,

      Great points!! Very interesting comment with tons of insight.

      It is amusing to see the Publishing industry so shaken, especially by open source education.

      It reminds me of what happened to the Entertainment/CD industry during the Napster to Apple Store time frame. A lot of scrambling and bankrupcies.

  2. Hmm is anyone else experiencing problems with the images on this blog loading?
    I’m trying to find out iff its a problem onn my end orr if it’s
    tthe blog. Anyy feed-back would be greatly appreciated.

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