End of an Era: The Princeton Review Sells Its Test Prep Business

Yesterday The Princeton Review announced that it will sell its test prep business to private equity firm Charlesbank Capital Partners for $33 million. The Princeton Review name and all of the company’s test prep-related operations will transfer to Charlesbank, and publicy-traded company now known as The Princeton Review (TPR) will change its name and focus exclusively on its for-profit online education arm, Penn Foster.

While the TPR name will live on, this truly marks the end of an era. Under the leadership of John Katzman, who founded the company in 1981 after graduating from Princeton University (the company has never been affiliated with the school), TPR quickly rose to become the first national challenger to Kaplan, which by the 1980s had become by far the largest test prep company in America. Katzman stayed at the helm until 2008, by which time the company had lost much of its magic but still had a very recognizable brand name.

It’s difficult to pinpoint exactly what happened to TPR, but one look at the company’s stock chart shows you that this was a distressed company. Looking through some of TPR’s recent SEC filings, one can see that the company has had a hard time adapting to the changing test preparation landscape. (We’re not dancing on graves here; we have a lot of admiration for what Katzman built.)

After receiving a $60 million infusion from Bain Capital Ventures and another private equity firm in 2007, the company embarked on an ambitious makeover plan, including buying up its regional franchises. While bringing the franchises in-house made sense in a lot of ways, in some ways TPR’s timing couldn’t be worse: The company was doubling-down on its brick-and-mortar business just as more and more test preparation moved to an online delivery format. The proliferation of lower-priced online test prep options made it hard for the company to maintain its large footprint and keep investing in its core businesses at the same time.

That opened the door (warning: about to toot our own horns) for companies such as Veritas Prep to keep investing and innovating in a way that was hard for TPR to keep up with. Smaller companies such as ours were just able to innovate and evolve — both in terms of our curriculum and how we deliver it — much more quickly than TPR could. This is the kind of thing that we constantly think about at Veritas Prep… What do we need to do now to better prepare our students for the GMAT, before someone else comes along and figures it out first? As things like the GMAT’s new Integrated Reasoning section come over the horizon, we need to be thinking ahead to what our services will look like two or three years down the road.

TPR will surely live on in some form, but it’s sort of sad to see the original company get dismantled in this way. TPR was (and really still is) a very well recognized brand among college applicants, and the new owners are surely working right now to make that brand stronger again. TPR’s influence will surely live on in some form.

(Fun fact: Did you ever wonder why Kaplan uses the domain kaptest.com in addition to kaplan.com? Back in 1994, when the World Wide Web was very much still the Wild West and domains such as pepsi.com and mcdonalds.com were still available for anyone to register, TPR registered kaplan.com and set up its own site at that address. After a precedent-setting lawsuit, TPR finally handed over the domain to Kaplan, but not before Kaplan had started using kaptest.com for its own services. TPR famously offered Kaplan the domain name in exchange for a case of beer in a display of the fun and seemingly younger culture of TPR at the time, but Kaplan didn’t find it funny.)

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One Response

  1. Steven says:

    While you mention that Bain Capital failed to help improve performance, you didn’t mention that Bain also used The Princeton Review to finance a leveraged buyout of Penn Foster and saddle The Princeton Review with a tremendous amount of debt. A ludicrous amount of debt.

    Jon Katzman left not too soon after Bain moved in. But not until he sold 10.8 million in stock. Although to his credit, Katzman has recently said, “Anything that takes the company out of the hands of Bain Capital is a good thing.”

    Bain Capital is the real reason the company failed. Who is left holding the bag? Not Bain but investors like the Washtenaw County Employees’ Retirement System.

    Bain Capital is a job destroying vulture that has the only incentive of filling its own coffers.

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