With the sale of Mcgraw Hill’s Education division to Apollo Global Management LLC for $2.4 Billion in cash, how will your college textbooks be affected? First, it is important to understand who Apollo Global management is; a private equity firm that specializes in flipping distressed businesses with outside investors money while maximizing profit.
McGraw Hill sold its textbook and education division due to its lower profit margin compared to the company’s Financial analytics businesses. This business has never quite been a focus for McGraw Hill and management did not have the focus to compete with a rise digital content and the used textbook and rental textbook market. Furthermore, I believe some actions by the company were viewed as exploitative by those in higher education, weakening its sales growth ability. McGraw Hill operated in a business segment where the ultimate customers do not have a choice over the product they buy, but failed to navigate this market successfully.
Apollo Management has detailed its plan for the company to move towards a more financial information model. It is highly likely that textbook content, revamps, and quality will fall, while Apollo takes advantage of the economics of this market, by riding out its ability to continue to sell textbooks while raising prices for a certain period of time. I would not be surprised if the company attempted to partner with universities and bookstores in order to lock in customers while having more control over used textbooks in the secondary market like amazon and ebay.
Eventually, I believe that the sale of McGraw Hill Education to Apollo Management will lead to an initial increase in prices of new McGraw Hill textbooks, a crack-down on the import of international editions or a complete disbandment of that entire operation, less used editions in the secondary textbook market, and eventually a decline in the use of McGraw Hill textbooks while Apollo puts the cash flow from this business to other uses. The fall of a major textbook publisher could lead to an increase in the prices of its competitor’s books due to less competition.
So, in the end, what does this mean for current college students and textbook buyers? You need to be absolutely sure you are seeking out the cheapest textbook prices online. By comparing textbooks prices for all of the reputable textbook websites, you can be sure that this profit pinching of McGraw Hill Textbooks will not affect you.