While one could easily dismiss McGraw-Hill's acquisition of J.D. Power as a financial transaction given the seeming lack of fit with the various McGraw-Hill businesses, I'd suggest that this acquisition is a brilliant move, possibly in league with the 1966 acquisition of Standard & Poor's. Indeed, the two companies are similar in that both are strong and trusted brands that deliver needed, objective guidance in large and important markets.
And it exploits a trend we've been harping on for some time: the greatest need of both business and consumer buyers, all of whom are overloaded with information and starved for time, is objective third-party guidance in consistent, standardized form. We call it the "new 3R’s," -- ratings, rankings and recommendations, and J.D. Power is the embodiment of this type of high value information. McGraw-Hill has picked up one of the biggest names in one of the hottest segments of the information business, so the deal is already looking smart at this level.
Is it fair to call J.D. Power an information company? I think so. After all, its business is to gather, database and publish consumer opinions on a wide variety of products. If you call the gathering process "research," then you would regard J.D. Power as an awkward fit with McGraw-Hill. If you call this gathering process "compilation," then J.D. Power looks more like a database information company, and McGraw-Hill has a strong track record with that type of business. Admittedly the line is blurry, but I'd argue that the owner of the company can push it into one camp or the other.
So how does J.D. Power, a ratings database company fit with the existing McGraw-Hill empire? Think of how the Aviation Week Group could amplify its market dominance as the new source of data on passenger airline satisfaction, which it could extend worldwide. Think of how the Construction Group could leverage its position as the preeminent provider of residential and commercial builder and landlord satisfaction data. Think of the endless stream of valuable "best of" content for BusinessWeek. And perhaps the greatest opportunities of all could come from leveraging qualitative data from J.D. Power with quantitative data from Standard and Poor's that could lead to breathtaking new opportunities powered by two of the best-known and most trusted brands around. And none of these even addresses the possibilities inherent in the custom side of the J.D. Power business, where it helps businesses measure the satisfaction of their own customers.
What's the downside to this deal? Figuring out how to sort through and prioritize the endless array of new opportunities this acquisition offers. J.D. Power is a huge brand backed by a powerful data collection platform churning out some of the most sought-after content anywhere. In my opinion, J.D. Power has loaded the bases, and now McGraw-Hill is at bat. Watch out!