About Inside Higher Ed Selling Majority Stake

Update 1/21: See link and blurb at bottom of post from new Editor’s Note at Inside Higher Ed.

Last week the Huffington Post ran an article by David Halperin breaking the news that the private equity firm Quad Partners had acquired a controlling interest in Inside Higher Ed.

Quad Partners, a New York private equity firm that is invested heavily in the for-profit college industry, and whose founder has aggressively opposed regulation of that troubled industry, has acquired a controlling stake in the respected trade publication Inside Higher Ed (IHE), which often reports on for-profit colleges and the policy disputes surrounding them. There has been no public announcement, but the Quad Partners website now lists Inside Higher Ed as one of its investments, among a range of education-related companies, including for-profit trade schools Beckfield College, Blue Cliff College, Dorsey Schools, Pacific College of Oriental Medicine, and Marinello Schools of Beauty.

Doug Lederman, one of IHE’s two top editors, confirmed to me that Quad purchased a majority interest in IHE in November.

Quad Partner James Tieng is now an IHE board member. Quad also owns the influential college admissions management company Noel-Levitz and other education technology companies that contract with colleges and universities — another sector that IHE covers.

The rest of the article then goes full conspiracy theory, building off the for-profit connection of both Quad Partners and its founder. Halperin seems to believe mere indirect association with for-profits is evil and compromising in and of itself rather than finding any changes or compromises in IHE coverage.

The bigger issue in my mind was described by Keith Button at Education Dive.

While the list of potential conflicts of interest in such a sale is long, the fact that the deal wasn’t announced and the potential news coverage issues weren’t publicly addressed up-front raises more questions.

This issue of disclosure was partially addressed in the original article:

“I would expect people to be watching us” in light of this purchase, says Lederman. “Our credibility is hugely important to us, and ultimately it will rise or fall on the nature and tenor of our coverage.” He says IHE will go on as before: “The proof will be in what we publish.” If there are significant references in IHE to specific Quad-owned companies, the publication will disclose the relationship.

In my mind, IHE made a serious mistake by not publicizing the acquisition back in November and issuing a blanket disclosure. I don’t fault them for selling the controlling stake in the company, especially given the lack of a paywall. But I do fault them for not realizing how the lack of disclosure created the opportunity for an advocate to publicly challenge them. It’s actually ironic to see a full-fledged advocate (Halperin writes extensively attacking the for-profit sector as part of his funding and openly calls himself an advocate) require 100% pure financial independence for IHE.

There are two types of disclosure that are relevant – a blanket disclosure announcing a key event such as the sale of the majority of company shares, proactively distributed and available; and article-specific disclosures if IHE articles reference companies tied to their owners. IHE seems to be relying on the latter, but their credibility will take a hit by not doing the former.

IHE was caught off guard by the Huffington Post article, and they seem to have quickly put up an Ownership Statement on the same day the article ran (Jan 14th).

Inside Higher Ed is an independent journalism organization. The journalistic independence is critical in ensuring the fairness and thoroughness of our higher education coverage.

Inside Higher Ed Inc. is owned by its three founders, other individual investors, and Quad Partners, a private equity firm that invests in the education space. Quad purchased a controlling share of Inside Higher Ed in November 2014 from a group of venture capital firms that invested in the company originally a decade earlier.

Owners of Inside Higher Ed stock who are not editors play no role in the editorial policies of the company.

The problem is the following:

  • This statement comes across as a reaction to Halperin – you got us – leading to the appearance that IHE had something to hide; and
  • IHE has done little to actually disclose this ownership, as the statement is only linked on the About Us page and Doug Lederman’s page (no articles or prominent placement of significant news event).

I read and research quite a bit of higher ed news and it took me a while to find this statement, despite the fact that I was specifically looking for information. With the current placement, very few people would have seen it.

This news is relevant, more for the Quad Partners ownership of Noel-Levitz than for their ownership of Marinello Schools of Beauty. Higher ed enrollment in the US has been declining the past 2 years, and this change is shaping up to be one of the biggest drivers of change initiatives for institutions and associated markets. There might be no other organization with more influential on enrollment management than Noel-Levitz. In the past 12 months Inside Higher Ed has written eight articles where Noel-Levitz plays an important role, and this prominent Fortune article profiling the company states:

Noel-Levitz might be the most influential force in higher education pricing that you’ve never heard of, empowering what’s become a three-stage, market-distorting game for college administrators.

Readers should know about the ownership connection given the importance of enrollment management and college pricing, and readers should not have to find this if and only if they read an article with direct references.

Do I believe that Quad Partners has or will change IHE coverage, especially on enrollment management and pricing? No. In my experience, IHE’s leadership and the reporters I’ve dealt with have been very ethical and honest. Furthermore:

Lederman says that at the insistence of IHE, the purchase agreement includes a clause that precludes Quad Partners from any involvement in editorial operations. IHE was launched by Lederman and two co-founders in 2004, with a modest investment from three Washington DC-area venture funds, including the owners of the lead generation company Double Positive. Those three investors, who sold their shares to Quad in November, also had no role in editorial operations, says Lederman.

IHE does a great job covering important stories in higher ed, including a watch dog role of exposing problems that arise. We need them to be trusted, and they should quickly correct the mistake. My unsolicited advise:

  • Write an article disclosing the sale and linking to the Ownership Statement – don’t make this information hard to find;
  • Quote a portion of the purchase agreement clause in the article to clarify their statement of editorial independence; and
  • Create a separate page of editorial policies.

Update 1/19: In a separate Education Dive post from the weekend:

A top editor of Inside Higher Ed said Friday that, in hindsight, he wished there had been more transparency about the sale of the publication’s controlling interest to a private equity firm that has invested heavily in for-profit education.

“We were founded without any support, then we had one set of investors and we had never said anything about them,” Scott Jaschik, an Inside Higher Ed founder and editor, told Education Dive. “In hindsight, I wish we had, because clearly this is of interest to people.” [snip]

“I guess I would just say to anyone who has questions, read us and read our coverage and call me if you think we’re doing anything that we shouldn’t,” he said.

Excellent work by Education Dive, by the way. As for IHE, I still think they would benefit from a blanket disclosure.

Update 1/21: Inside Higher Ed has now posted a full blanket disclosure note. Good for them.

Some of you may have seen some recent blog posts and discussion on Twitter or elsewhere about Inside Higher Ed Inc.’s ownership status. We wanted you to have more information directly from us. [snip]

In November 2014, Quad Partners, a private equity firm that invests in numerous companies in the education space, including some small for-profit colleges, bought a controlling interest in our company by purchasing shares of Inside Higher Ed Inc.’s stock from our previous investors.

Quad intends to help Inside Higher Ed expand its staff, extend its reach, and improve its coverage and services. Its goal is to help Inside Higher Ed do what it does better. And yes, like all investors, it wants to make money.

Owners of Inside Higher Ed Inc. stock who are not editors play no role in the editorial policies of the company. Quad acknowledged explicitly in its agreement to invest in Inside Higher Ed Inc. that it would be precluded from any involvement in editorial operations.

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About Phil Hill

Phil is a consultant and industry analyst covering the educational technology market primarily for higher education. He has written for e-Literate since Aug 2011. For a more complete biography, view his profile page.
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