Vacant No More

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This article was prepared for the October 29, 2003

issue of U.S. 1 Newspaper. All rights reserved.

Riding the Growth Wave in Trade Group Tests

by Barbara Fox

Princeton is known as an education town — not only

for its colleges, but also for Educational Testing Service, the

world’s

largest private educational testing and measurement organization.

The late Henry Chauncey, founder of ETS, believed that testing

prospective

college students could help to level the playing field for rich and

poor alike.

Now a new kind of testing business is sprouting here — testing

for certification and professional status. Princeton is home to a

half-dozen companies of varying sizes, including a brand-new start-up,

and a for-profit spinoff from ETS (see pages 50 and 51). Named after

Chauncey, the seven-year-old spinoff known as the Chauncey Group

International

merged with two other companies to form Capstar, in which the

not-for-profit

parent company, ETS, will own virtually all the shares.

Under the new name, with Michael Fitton — a Chauncey board member

since its inception as the new CEO — Capstar plans to do a

"roll-up,"

to buy out other companies in the industry for aggressive growth.

"In certification and licensure we are one of the largest players,

if not the largest, in the association market," says Fitton,

estimating

that Capstar has 25 percent of the overall market. This association

and trade group market is fragmented, he points out, which is perfect

for a roll-up strategy. His boss, ETS CEO Kurt Landgraf, has been

quoted in the business press as saying that he hopes Capstar will

increase its current $100 million revenues to $400 or $500 million

in the next three to five years.

In January Fitton will move Capstar from 30,000 feet in the Anrich

building on ETS’s Rosedale Road campus to an impressive new 47,000

square foot building, Alexander Commons, at 693 Alexander Road. Bill

Barish and Paul Goldman of Commercial Property Network represented

the owner, Compass Realty, of Cranbury South River Road. There has

been some delay in the actual move-in, which is now scheduled for

January.

Before Fitton came on board as the CEO of Capstar, the

wheels were in motion to move the Chauncey Group off the Rosedale

Road campus. ETS needs "swing space" to use during big

construction

projects, which involve tearing down and rebuilding office buildings.

It’s also very appropriate for the for-profit subsidiary to be visibly

separated from the nonprofit ETS, and that’s actually how the Chauncey

Group began — with offices at the Carnegie Center.

But the major reason for the move is to expand. Capstar has 100

programs

and 250 tests given to 2 million people in North America, and half

of the tests are given online. More than 200 associations and

regulatory

agencies use Capstar’s services, including those in insurance

licensing,

real estate, nursing, and nursing aides. Capstar administers all its

own paper and pencil tests, and it farms out just over half of its

computer-based tests to Prometric (part of Thomson Learning

Corporation,

the Connecticut-based firm that also owns Peterson’s on Lenox Drive).

The new space will accommodate three divisions, with 675 employees

overall, 135 in Princeton so far, with room for growth. And Fitton

looks forward to arranging the space for a team environment, in

contrast

to his current building, where offices are laid out as a series of

pods. "Here, it is very hard to have collaboration," says

Fitton. Capstar’s current company lineup:

In Princeton, what is still known as the Chauncey Group

International

does certification and licensing examinations for professionals,

business,

and government. Alone, it administers 50 programs and 140 tests —

via paper-and-pencil, computer-based, and Internet-based testing —

to about 3 million people in 60 countries annually.

Experior Assessments , based in St. Paul, Minnesota, is

the largest provider of outsourced state licensure exams used to

regulate

occupations in insurance, construction, and cosmetology, and it is

adding services for real estate, nurse aides, and food safety.

Experior

represents the merger of ITC (Insurance Testing Corporation) and NAI

Block, which does state licensure programs.

Baltimore-based iLearning Inc. offers media-rich product

education. Its platform lets clients leverage the speed, reach, and

efficiency of the Internet. When iLearning was acquired by the

Chauncey

Group/Capstar, its investors contributed both the company and some

capital. On October 31 the investors — which include Sylvan

Learning

Company, Sterling Capital, and Cherokee Limited — are scheduled

to sell back their interest, and Capstar will revert to being owned

by ETS, just as the Chauncey Group had been. "We wanted ETS to

be the 100 percent shareholder for consolidation purposes and

flexibility

in terms of growing," says Fitton, who plans to dramatically raise

the value of Capstar.

Last January ETS took back one of Capstar’s units, the Test

of English in Corporations (TOEIC), because ETS had its own

international

test, TOFEL for students. "It made sense to consolidate the

international

activities at the parent company," says Fitton.

Fitton, 46, is the company’s third CEO, following Alice Irby, the

founding CEO, and Judith Moore. Irby had been introduced to Fitton

by a retired senior executive from Merck, who knew that Fitton’s

experience

with parent/subsidiary relationships was comparable to the

ETS/Chauncey

Group relationship. As a Chauncey Group board member, Fitton worked

with Irby on acquiring Insurance Testing Corporation, which was put

together with NAI Block to form Experior.

"After Judith left, Kurt (Kurt Landgraf, CEO of ETS) asked me

if I would take the job. I had been consulting with them on everything

from mergers and acquisitions to development and growing the business.

My only misgiving was the location," says Fitton. He commutes

on the weekends to his home in Sparta, where he and his wife have

three children ranging in age from 13 to 20.

"I understand the business very well, and what the mission is

very well. I understand how you grow a business. What I brought was

both a good balance of the consideration of ETS’ mission and bringing

a business sensibility to what ETS said would be a for-profit

activity."

Fitton is studying a list of about 90 companies, looking for

acquisition

targets. "The E-learning players that are limited in scope are

becoming a commodity," says Fitton. "I believe there will

be a rollup of those niche players into companies that want to provide

the breadth and depth that Capstar provides. It isn’t just the

assessment,

just the learning, or just the measurement, it is the effective use

of all of those things."

A good example of future consolidation was provided last week with

the agreement to merge two publicly traded companies, Docent (Mountain

View, California) and Click2Learn (based in Bellevue, Washington).

Docent provides an Learning Management Systems product (LMS) with

a real strength in testing and Click2Learn provides an LMS along with

course authoring tools. The combined company is expected to have

stronger

"best in class" enterprise learning products and services.

"Consolidation in this industry will become much more frequent

over the near term as industry companies attempt to re-position

themselves

as providers of complete enterprise learning solutions," says

Steven Haase, who has been a player in the E-learning and E-testing

space since 1996. He sold one E-testing company (Princeton Learning

Systems) to what is now eMind, and he is starting another, Akros

Learning

Group (see article on page 50).

Haase thinks future industry leaders will position themselves as

strategic

enterprise partners, not vendors. "Large companies are now looking

for a partner that brings a wide experience base, proven technology,

and a comprehensive offering of a variety of enterprise learning

solutions,"

says Haase. "ETS and Capstar will be one of the leaders in this

category if they are able to effectively package and sell their

experience

and acquire selected assets to complement their offering. They have

a terrific management team and are very well positioned."

Competition in this space includes the likes of Pearson’s VUE

(www.vue.com),

Thompson’s Prometric (www.prometric.com), and large consultants such

as Accenture (www.accenture.com), Deloitte (www.dc.com), and IBM

(www.ibm.com/services).

Fitton agrees with Haase that the industry leaders will go after

vertical

markets, and he is picking his markets carefully. For instance, he

has no plans to enter the pharmaceutical regulatory market already

staked out by Eduneering, his soon-to-be-neighbor on Alexander Road.

Eduneering leads the field in Federal Food and Drug Administration

testing; it provides the tests to the FDA for free and then sells

the tests to the pharmas.

"You don’t go where the market is not," say Fitton. "You

go where you can be effective. By the same token, there are a lot

of opportunities for being effective in the pharmaceutical

industry."

But Fitton has not ruled out the overall pharmaceutical market, and

notes that many nonregulatory needs are not being met. For instance,

he plans to enter the area of learning and testing for sales

effectiveness.

"We would never consider Capstar a competitor," agrees Tia

Smallwood, formerly of ETS, now the chief marketing officer at

Eduneering,

a 100-person company with about 40 employees at University Square,

the office complex that is across from the Hyatt and borders Route

1. "Our space is compliance management, not online learning and

online testing." Best known for its work in the pharmaceutical

and medical device fields, and it also works in the fields of energy,

manufacturing, restaurants, healthcare providers, and health

insurance.

"But we do training," Smallwood points out, "and as part

of the training there are competency exams. Our clients are very

highly

regulated and they require someone to integrate all the different

elements they need to be in full compliance. If certification is

needed,

we will help design the online solution."

For instance, Eduneering designs the online courses for the Food and

Drug Administration’s Office of Regulatory Affairs and provides an

airtight documentation of who passes what tests. The tests and the

documentation system are resold to pharmaceutical and medical device

firms who use them for training. It also partners with ISPE (life

science professionals) and the Association of Clinical Research

Professionals

to create courses, which are part of an overall certification process.

Currently Eduneering is designing a certification program to qualify

equipment operators at Ethicon.

Variety has been the spice of Michael Fitton’s life;

he has been involved in companies ranging from coffee to dog kennels,

but he made his first big money with a technology systems integration

firm.

His father was an engineer for Pratt & Whitney, and his mother was

a social worker. One of four children growing up in Connecticut, he

went to a two-year technical college, Three Rivers College in Norwich,

and then attended Rutgers (earning a bachelor’s degree in computer

science) and Stevens Institute of Technology (earning a master’s

degree)

on government grants, part of the time working at Bell Labs. "I

spent my first 10 years in Bell Labs and was a well-regarded

technician,"

he says. "When I left there, I went to a partnership, a small

Israel-based company in New York City and learned about running a

business. They sold contracts they couldn’t deliver, and I helped

them deliver."

"Then when I went into business for myself, I found that

diversification

— being able to provide a lot of things to a lot of people —

was important." He founded, grew, and sold Unified Systems

Solutions

in Mountain Lakes. It did fixed price systems integration work for

major corporations. Among its projects were helping Florida Power

and Light downsize from mainframes to a client server environment

and doing client server and network management activities for AT&T.

He sold the 200-person company to Computer Horizons and declines to

name the selling price but notes it was "before the market got

hot," and that his company was doing about $20 million in revenue

at that time.

Along the way Fitton worked for General Logistics International and

had a company called Advanced Capital Investments, which specialized

in the formation and capitalization of companies in the technology

and real estate markets. He served briefly on the board of William

Multi-Tech Inc., but resigned. William was an incubator for companies

involved in the Internet, biotechnology, and other high

technology-related

areas. "They had what I considered to be a flawed approach to

how to do a `roll-up,’ both overextending and going into too many

directions, and I stepped away," says Fitton. Currently he is

a board member at a Stamford, Connecticut-based startup, Enamics,

which offers business technology management solutions.

Fitton acknowledges that he, with his mergers and acquisition

mentality,

has been thrust — or has thrust himself — into an educator’s

lair. But he points out that his major business success, systems

integration,

is coming in handy. "You could almost think of what I am doing

now as learning systems integration," he says. "What I learned

by running a systems integration company is that anyone can have

computers,

networks, and consultants, but putting it all together to make it

effective was a problem."

He defines the term. "In the existing markets, learning systems

integration is being able to provide the continuing education, the

test, the assessment, and the practice that allows people to better

get the credentials to get the job they want."

"We are now offering full assessment learning and measurement

capabilities. Online learning is one piece of a larger picture, a

blended learning picture, which includes everything from assessments,

furthering careers, getting better jobs. It is an important new aspect

of this blended environment."

Henry Chauncey’s vision was that testing could level the playing field

so that economically disadvantaged students who didn’t go to fancy

prep academies could get into Ivy League schools. The spinoff of his

testing enterprise can help working professionals get where they need

to be. Says Fitton: "Not just giving the test — but helping

people succeed — is one of the parts of the Chauncey vision."

The Chauncey Group/Capstar, 664 Rosedale Road,

Princeton 08540-0001. Michael Fitton, president & CEO. 609-720-6500;

fax, 609-720-6550. Home page: www.chauncey.com

Top Of Page
Vacant No More

Capstar’s move to Alexander Commons will solve one

of Princeton’s puzzling real estate problems — prime property

that did not sell. Owned for a long time by Axel E. Rosenblad, then

bought and operating as Ahlstrom Rosenblad, this site used to house

Princeton’s only real "factory floor" where you could see

welders at work; they made evaporators used in the pulp and paper

industry.

The two buildings were vacated in 1990 and 1992, to be used briefly

as the headquarters for filming the movie IQ.

Throughout the ’90s, no company wanted to move into this part office,

part factory. Then Jalsa Urubshurow of Compass Realty on Cranbury

South River Road razed the site and, on speculation, built three

two-story

buildings.

The project was ready in 2000, but it stayed empty for three years.

Though divisible, Alexander Commons begged for a single occupant.

Next door to Campus Drive and kitty-corner from the Hyatt, it has

a commanding presence on Alexander Road. Commercial Property Network

represented Compass Realty. The property had been listed last year

at $26.50 per square foot.


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