McGraw-Hill's J.D. Power Buys NADA Used Car Guide

NEW YORK (TheStreet) -- Consumers are using more technical data when searching for a vehicle. Now a key source of intelligence for dealers, wholesalers, lessors and lenders is stepping up. 

J.D. Power, a unit of McGraw-Hill Financial  (MHFI), said it will buy NADA Used Car Guide from the National Automobile Dealers Association, a U.S. trade group representing franchised car dealers. 

Earlier this year, McGraw-Hill hinted at increasing interest in acquisitions following a $1.5 billion settlement of government charges and investigations against its Standard & Poor's unit relating to activities during the global financial crisis. 

The transaction represents an expansion of J.D. Power's pricing, analytic and forecasting offerings to vehicle dealers, wholesalers, lenders and others in the business-to-business space. The transaction is expected to close in the third quarter. 

Terms of the acquisition weren't disclosed.

Retail new-vehicle sales alone in the U.S. amount to about $500 billion annually and include many forms of leasing and financing. Consumers using digital technology can discover accurate and up-to-the-moment changes in pricing. J.D. Power and NADA had been working together to create more transparency in automotive transactions, mainly for retailers, wholesalers and financing agents. 

"We have been working closely with NADA Used Car Guides since 2008 and combining our retail expertise and focus on new vehicle pricing and analytics with their complementary expertise in the used vehicle arena, we will be able to offer a more comprehensive view and help dealers make better decisions," said Deirdre Borrego, J.D. Power's vice president of strategy, in an interview. 

Kelley Blue Book, Edmunds.com and TrueCar (TRUE) are other digital ventures that help shoppers determine vehicle prices online. The true cost or value of vehicles fluctuates constantly due to rebates being offered by manufacturers, changing demand for certain popular vehicles and other factors such as oil prices.

Over the past five years, McGraw-Hill has outperformed the S&P 500, rising 273% against the index's increase of 93%. Of the 12 equity analysts following the company, eight recommend a buy or strong buy of the stock; one recommends a hold. Known as a publisher of intelligence for industries as diverse as oil and securities, McGraw- Hill bought J.D. Power in 2005.

The small, yellow NADA Used Car Guides are familiar fixtures for used-car dealers, listing retail, wholesale and dealer prices reflecting recent transactions. Eventually, the guides will carry the J.D. Power name. 

"J.D. Power has built its strong brand through analytics, data and its growing benchmark business. Benchmarks are a key to the McGraw-Hill Financial business model and the NADA Used Car Guide adds a unique set of valuations, which are used as benchmarks by customers, to the well-respected J.D. Power portfolio," said Douglas Peterson, CEO of McGraw-Hill.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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