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This article was prepared for the October 29, 2003
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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
largest private educational testing and measurement organization.
The late Henry Chauncey, founder of ETS, believed that testing
college students could help to level the playing field for rich and
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
merged with two other companies to form Capstar, in which the
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
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,
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
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
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
and 250 tests given to 2 million people in North America, and half
of the tests are given online. More than 200 associations and
agencies use Capstar’s services, including those in insurance
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
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
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:
does certification and licensing examinations for professionals,
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.
the largest provider of outsourced state licensure exams used to
occupations in insurance, construction, and cosmetology, and it is
adding services for real estate, nurse aides, and food safety.
represents the merger of ITC (Insurance Testing Corporation) and NAI
Block, which does state licensure programs.
education. Its platform lets clients leverage the speed, reach, and
efficiency of the Internet. When iLearning was acquired by the
Group/Capstar, its investors contributed both the company and some
capital. On October 31 the investors — which include Sylvan
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
in terms of growing," says Fitton, who plans to dramatically raise
the value of Capstar.
of English in Corporations (TOEIC), because ETS had its own
test, TOFEL for students. "It made sense to consolidate the
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
with parent/subsidiary relationships was comparable to the
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
Fitton is studying a list of about 90 companies, looking for
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
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
"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
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
Group (see article on page 50).
Haase thinks future industry leaders will position themselves as
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
says Haase. "ETS and Capstar will be one of the leaders in this
category if they are able to effectively package and sell their
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
Thompson’s Prometric (www.prometric.com), and large consultants such
as Accenture (www.accenture.com), Deloitte (www.dc.com), and IBM
Fitton agrees with Haase that the industry leaders will go after
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
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
"We would never consider Capstar a competitor," agrees Tia
Smallwood, formerly of ETS, now the chief marketing officer at
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
"But we do training," Smallwood points out, "and as part
of the training there are competency exams. Our clients are very
regulated and they require someone to integrate all the different
elements they need to be in full compliance. If certification is
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
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
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
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
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
"Then when I went into business for myself, I found that
— being able to provide a lot of things to a lot of people —
was important." He founded, grew, and sold Unified Systems
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
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
has been thrust — or has thrust himself — into an educator’s
lair. But he points out that his major business success, systems
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
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."
Princeton 08540-0001. Michael Fitton, president & CEO. 609-720-6500;
fax, 609-720-6550. Home page: www.chauncey.com
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
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
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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