McGraw- Hill Financial: Market Expansion Opportunities & Challenges

Written by Michael Thieberg, Consultant, Arche Value Management

2013 promises to be anything but business-as-usual for McGraw-Hill. Over the past few years, the conglomerate has undergone a complete transformation, from a traditional information publisher serving a variety of constituents to a more strategically focused, pure-play, B2B information and analytics provider centered on the capital and commodities markets. The culmination of this process of reinvention, following recent divestitures of its consumer assets, is the recently announced sale of its McGraw-Hill Education (MHE) business to financial sponsor Apollo Global Management for $2.5 billion, which is expected to close early this year. With organizational alignment around its core competencies in benchmarks and credit assessments to assess default risks, the newly renamed McGraw-Hill Financial (MHF) is poised to become a high-margin data and analytics provider with strong cash flow and faster growth potential.

Glenn Goldberg, President of MHF’s Commodities and Commercial Markets Division, delivered a keynote speech at the SIIA Summit that discussed the challenges and opportunities to expand the Company’s businesses and gain market share. Goldberg acknowledged that quality content, in and of itself, is not sustainable, but rather must be combined with technological innovation, and continuously improved upon to maintain relevancy in a changing environment. Breakthroughs and innovation, tied not just to technology but by also linking disparate data sets and customization, will enable MHF to better serve their customers and increase share of wallet.

McGraw-Hill’s strategic objectives will be achieved through a blend of organic growth, focused on content data analytics as well as bolt-on acquisitions. Organic growth initiatives include building new capabilities through product development, further penetrating existing markets and entering adjacent new markets, leveraging the McGraw-Hill brand beyond its core benchmarks, says Goldberg. By accelerating investments in technology to improve customer performance and outcomes, MHF will have the infrastructure to drive shareholder value.

Achieving MHF’s growth objectives will not come without its challenges, however, many of them regulatory. Goldberg urged all B2B content providers to closely pay attention to intellectual property and copyright protection, customer piracy legislation and foreign trade barriers. New government imposed proposals to restrict the gathering and use of customer data could hamper MHF’s ability to provide market intelligence services to its B2B customers. As a global enterprise, any restrictions on foreign trade would also impede the Company’s ability compete effectively on a global basis. And while the integration of social media and mobile delivery platforms is needed enhance customer engagement, Goldberg ceded, at this point in time, there is no clear path to make money and enter the workflow of the customer though these channels.

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Michael Thieberg
Michael Thieberg is a independent consultant at Arche Value Management (AVM), a corporate finance advisory firm. Mr. Thieberg has over 15 years of strategic financial management experience in corporate development, investment banking and private equity investing with industry expertise in the B2B information and marketing services sectors.

IIS Breakthrough Recap: 2013 Capital Markets Outlook for the Information Industry

Michael Thieberg, Consultant, Arche Value Management, Inc.

Written by Michael Thieberg, Consultant, Arche Value Management

Why does “smart” capital lag behind innovations in technology? This was the first question posed by Kevin Worth, CEO of The Deal, who moderated a panel of capital markets experts – research analysts, venture capitalists, private equity investors and M&A advisors to solicit their views on asset valuations and the financial outlook for the information services sector. Tolman Geffs, Co-President The Jordan, Edmiston Group acknowledged that while capital is smart in the long-term, it is not smart in the short-term. As the late 90s speculative dot-com bubble has taught us, advents in technology don’t necessarily manifest themselves into proven business models.

Consequently, although there are pockets of froth (e.g., Salesforce.com’s $689M acquisition of social media marketing platform Buddy Media), we’re in a buyer’s market with larger information publishers remaining fairly conservative in their M&A activities, says Geffs. This sentiment was further exemplified by RRE Ventures Co-Founder, Jim Robinson, who cited the buzz around Big Data, which has yet to materialize as a working business model, as a big idea in the sector that has yet to earn the faith of the capital markets.

With regard to asset valuations, there was an air of optimism amongst this group. According to Piper Jaffray & Co. Research Analyst Peter Appert, established publicly-traded information services companies will trade at a premium to the market due to attractive business model characteristics including top line visibility and predictability (due in part to subscription-based revenue models), operating leverage from scalable, data-rich platforms, strong cash flow generation and low capital intensity. With regard to debt financing, companies with least $10M of EBITDA, leverage equal to 3.5x -4.0x EBITDA is highly achievable says Geffs.

Ongoing access to capital and financing, strengthened balance sheets and divestiture activity will continue to fuel deal activity in 2013. M&A and strategic investments in emerging marketing automation companies is one area in particular which will be a focus for the information sector. There are definitely B2B opportunities for fee-based, curated, moderated social media, says Wayne Cooper of Greenhaven Partners, a private equity firm that invests in emerging information-based companies. Furthermore, social media will continue to impact on the sector in 2013. There isn’t a credible large organization that isn’t struggling with its social media strategy, says RRE’s Jim Robinson. Companies will be spending a lot of money on social media technologies and platforms to better understand the buying behavior of their constituents.

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Michael Thieberg
Michael Thieberg is a independent consultant at Arche Value Management (AVM), a corporate finance advisory firm. Mr. Thieberg has over 15 years of strategic financial management experience in corporate development, investment banking and private equity investing with industry expertise in the B2B information and marketing services sectors.

IIS Breakthrough Recap: Content Dethroned By Technology

Deborah Richman, Consultant, Zions Bank

Written by Deborah Richman, Consultant, Zions Bank

At the Information Industry Summit’s crossfire session, experts agreed on one thing: content is no longer king. Gone are the days when business information was controlled by a few, stable, necessary sources delivering to ever-loyal customers. Here’s how the experts view technology’s destabilizing force:

  • “Technology is extremely critical, and content is what you have to have,” said Andy Prozes, senior advisor at Warburg Pincus.
  • John Hartig, CEO of Sports Information Group believes the industry’s in “hand-to-hand combat” between offering relevant data and leveraging technology.
  • Our business is now about “peaks and troughs and rapid cycles of developments,” explained Stephen Ryden-Lloyd, SVP at Innodata.
  • Denzil Rankine, executive chairman at AMR International, declared “you have to have a CEO who gets it and understands technology.”
  • “Is technology endlessly complicating the business model?” asked Dan McCarthy, a DeSilva+Phillips partner. Yes, indeed.

 

The “new normal” challenges

Depending on your marketplace and customers, there are different ways to integrated content, commerce and technology. Still, these “new normal” challenges need to be addressed.

Technical DNA here: Perhaps the largest challenge relates to having or injecting technical DNA in the company. If your company began life as pure-content business, then new executives will need to help evolve the business and culture. Companies must be willing to invest in technology, functionality and people.

Continuous product cycles: It’s not possible to roll out a product and sit back for a year or two anymore. You must understand road maps and agile releases, to be responsive to the market. You also must stay abreast of technology platforms, with the right partners. And whether you “make or buy,” remember to budget for R&D and development.

To workflow or not workflow: Information will get distributed through multiple workflow systems used by your customers. You could work closely with customers to integrate into their workflows or develop more standard applications familiar to them. If appropriate, you might be able to focus on outcomes rather than workflows.

The information industry will thrive

The information industry is still growing and attracting new entrants and sources. It is still undergoing a massive transition, due to game-changing digital technologies accessible to publishers and customers.

“This will remain an attractive market,” explained AMR’s Denzil Rankine. “A trend is that it is a tougher to be alone, as a sole supplier to the market. More entrants, providers will have a downward pressure on margin.”

Innodata’s Stephen Ryden-Llloyd observed the competitive pressures:  “Authority can come from multiple places today.  Also from social networks or wisdom of the crowds. There’s a huge degree of cleverness, opportunity” in the marketplace.

“But if you build new tech, the growth rates are there,” declared Warburg’s Andy Prozes.

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Debby Richman spent her formative years at D&B, leading the reference business from print to online and web offerings. She has since held digital leadership roles at Overstock, About.com, Looksmart, Starz, Collarity and Zions Bank.

 

Titans of a New Information Order

I sat down with Jim Kollegger, Session moderator and organizer of the CEO panel – Titans of a New Information Order – to find out what’s in store for this year’s discussion. Jim will take the stage at IIS Breakthrough on Wednesday January 30, alongside Kurt Eichenwald, Contributing Editor with Vanity Fair and a New York Times bestselling author, Vanity Fair, Thomas Glocer, Former CEO, Thomson Reuters, David Kirkpatrick, Senior Technology & Internet Editor, Fortune, and Michael Perlis, President & CEO , Forbes Media LLC. To see this session, register at siia.net/IIS

 

Jim Kollegger, CEO, Genesys Partners, Inc.

Kathy: Jim, over the years you have put on a showstopper session at IIS where you gather a team of industry “heavy weights” to discuss their perspectives on the shifts in the industry, all from different perspectives. What is the goal/ purpose of your industry outlook panel?

Jim: There have been eleven Summits, and even before IIS became a formal Summit I was hosting keynote panels going back all the way to the 80s! I feel like the Dorian Grey of the SIIA and its predecessor.

Kathy: What can the audience expect to take away from the Titans of the New Information Order?

Jim: Our biggest objective is to provide the audience with perspective, a longer view, maybe a different view as to where things are heading. This is the Wayne Gretzky metaphor — “why are you successful? Because I skate to where the puck is going to be!” You’d be amazed how that sticks.

Kathy: What are some of your most memorable moments as moderator of this session over the years?

Jim: One unforgettable panel was a powerhouse of Ted Leonsis of AOL, Nancy McKinstry of Wolters Kluwer, Jim Fallows of the Atlantic and Martin Sorrell of WPP. Two of them held forth so the others had a hard time getting a word in; and one of them was actually texting while on the panel. I won’t tell you which one!

Kathy: Did anyone in particular get the audience’s blood to boil?

Jim: We go for light, not heat. There’s plenty of cross-fire on the air, as Jon Stewart pointed out. But reasoned discussion where people are frank and not posturing is a rarity.

Kathy: Who would you invite back to reflect on their original prediction VS what really happened

Jim: Many, many of them. Especially John Patrick, IBM’s former Internet CTO, who predicted the coming of wi-fi and blogging, when it didn’t have a name, and when blogging was a joke.

Also Ted Leonsis who early on spotted “the wisdom of crowds” and John Markoff, of NY Times, who said it was NOT too late to start a new search engine—when Yahoo and Excite seemed to own the market.

Kathy: What are YOUR Industry predictions on what’s in store for 2013-2014?

Jim: Mobile, mobile, mobile. Continued consumerization of the enterprise, smarter Siri’s, and verticalization of market approaches. We’ll also see continued domination of markets by the four horsemen of the Internet–Apple, Amazon, Google, and Facebook. There will also be more conflict as some of those put their own interests above their content partners.

Meet IIS Breakthrough Conference Chair Simon Beale

Simon Beale

Simon Beale, IIS Co-Chair

I sat down with IIS Conference co-chair Simon Beale, Senior Vice President Global Sales and Training of ProQuest to discuss IIS, what sessions he’s most looking forward to, and what he has learned as a result of co-chairing the industry’s premier conference for information executives.

Kathy: Why did you decide to co-chair IIS this year?

Simon: This is my second term on the SIIA Content Board and, given that the IIS is our most important annual event, agreeing to co-chair the conference with Clare Hart has proved to be an excellent way of providing guidance and input into its shape and development. With the dramatically accelerating pace of integration of technology into the content business, the SIIA IIS has the opportunity to become the cornerstone for thought leadership for the key leaders in our industry in debate and discussion.

Kathy: What are your goals for the conference this year?

Simon: The goal for January’s conference has been somewhat different this year. For the 2013 IIS Conference we wanted to ensure that C-suite executives from across the media, publishing and information landscape would be able to spend a couple of days at IIS in New York watching, listening and participating in a discussion between the industry leaders as to where we see this industry heading. IIS will be raising the bar for the debate amongst our most senior execs.

Kathy: What is unique about IIS?

Simon: We’ve always been lucky in that the range and diversity of the membership of SIIA gives us the ability to tap into an incredibly rich seam of knowledge and experience from across the information industry. The combination of existing SIIA member companies and start up and emerging companies, all sharing ideas and contrasting views is what makes IIS a unique event. You will not get a room with this level of focused industry firepower at any other conference.

Kathy: What should people expect this year and why is that different from previous years?

Simon: The 2013 IIS will be more focused towards C-suite executives than previous conferences. We are narrowing our focus. We have put together the premier line up of speakers and panels. We have assembled an agenda that will provide thought provoking sessions for the leaders in our industry. The schedule has been tailored to provide the maximum value for time spent for these execs. The key executives from across the software and information industry will not want to miss these two days.

Kathy: Any favorite sessions you are looking forward to?

Simon: I think the George Colony keynote will provide a great exposition of the impact of some of the key technology trends, while several of the panel discussions have got stellar industry lineups. I also think the leadership dinner, hosted by Nicholas Thompson of the New Yorker will be a wonderful evening!

Kathy: Anything you learned or were surprised by in your work planning IIS 2013?

Simon: I learned few things. I was stunned by how much work the IIS steering committee has put into this event. I have no doubt that it will be the most successful and though provoking IIS for many a year and this will be down to the hard work that the committee has put in (all in their spare time, I hasten to add). I learned how great an impact a creative and decisive co-chair like Clare Hart can have on shaping an event of this type. Her influence has been profound. I also learned how much of a juggling act putting all the moving pieces together can be and, for that, we have you Kathy to thank, ably assisted by Jenny.

IIS Breakthrough 2013

 

 

Measured Progress

 We are excited about our partnership with the InfoCommerce Group to produce DataContent 2012, coming up October 9-11 in Philadephia. Below is a blog post by Russ Perkins the founder of InfoCommerce Group. As we lead up to the conference, we will be highlighting posts from his blog which focus on the issues and topics we will be discussing at DataContent 2012. Enjoy!

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Monitoring what’s going on with online start-ups is not only a great way for me to identify interesting new data-driven products and new market opportunities, it’s also a touchstone for assessing how the publishing industry is doing relative to the best and brightest online innovators. Here are just three recent examples, each interesting to me in a different way. Read more

2011 SIIA Content CODiE Award winners announced at the Information Industry Summit