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Berkery Noyes Releases Education Industry M&A Report For Full Year 2014

Thursday, January 22, 2015

NEW YORK — January 22, 2015 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2014 mergers and acquisitions trend report for the Education Industry.

The report analyzes M&A activity in the sector during 2014 and compares it with data covering 2012 and 2013. This market includes information and technology companies servicing the Education Industry, including the K-12, Post-Secondary, Childcare Services, and Corporate & Professional Training segments.

Transaction volume improved nine percent on a year-to-year basis. Aggregate value rose 25 percent, from $9.12 billion to $11.40 billion. The median revenue multiple increased from 1.5x to 2.4x, while the median EBITDA multiple remained nearly constant at 11.1x.

There was a 34 percent rise in the number of Education deals backed by financial sponsors, from 67 to 90 transactions. The industry’s largest transaction in 2014 was Charterhouse Capital Partners’ $2.3 billion acquisition of SkillSoft, which provides cloud-based learning solutions for enterprises and governments. 

The most active market segment in 2014 was Professional Training Services with 70 deals. Moreover, volume in the combined Professional Training Services and Technology segments increased 19 percent from 2013 to 2014. One notable transaction in the Professional Training segments in 2014 was media company Bertelsmann’s acquisition of Relias Learning, a Software-as-a-Service (SaaS) e-learning solutions and course content provider that serves the healthcare and senior care market, for a reported $540 million. Bertelsmann acquired Relias Learning from Vista Equity Partners, which formed Relias Learning in 2012 after combining Silverchair Learning Systems and Essential Learning.

Other Professional Training deals completed by high profile acquirers during the year included Pluralsight’s acquisitions of Smarterer, an online skills assessment platform, for $75 million and Digital-Tutors, an online training resource for creative professionals, for $45 million; Kaplan’s acquisition of Dev BootCamp, a nine-week software coding program that turns beginners into full-stack web developers; and Providence Equity Partners’ acquisition of a majority stake in VectorLearning, which offers online continuing education solutions to the architecture, engineering, and construction (AEC) and facilities management markets, from LLR Partners.

As for additional market segments in the report, the industry’s largest strategic transaction in 2014 occurred in the Higher Ed-Media and Tech segment. This consisted of The Advisory Board Company’s acquisition of Royall & Company, a provider of student engagement and enrollment management solutions, for $850 million. In terms of volume, Higher-Ed Media and Tech deal activity declined ten percent, returning to its 2012 level.

The number of transactions in the K-12 Media and Tech segment increased 17 percent. Deals by notable acquirers in the K-12 Media and Tech segment throughout the past year included Hellman & Friedman’s acquisition of Renaissance Learning, a K-12 assessment and analytics company, for $1.1 billion; Insight Venture Partners’ acquisition of iParadigms, the creator of web-based plagiarism and student feedback solutions provider Turnitin, for $752 million; Blackbaud’s acquisition of WhippleHill Communications, which provides cloud-based enrollment, learning, content, and student information management solutions to K-12 private schools, for $35 million; and Blackboard’s acquisition of ParentLink, a provider of K-12 communications tools that help connect teachers with parents.

“The focus on education access, data analytics, and outcomes-driven technology products and services continues to shape the industry,” stated Peter Yoon, Managing Director at Berkery Noyes. “The strategic players are making acquisitions in order to meet market demands in these areas across the entire education and training spectrum, from PreK-12 to Corporate Training. Moreover, the continued strong investment levels for early stage education companies will provide a fertile ground for future partnerships and M&A activity.”

“In an environment of intense discourse on K-12 students’ learning, the online testing landscape varies enormously by state,” said Mary Jo Zandy, Managing Director at Berkery Noyes. “However, tests and assessments have strong momentum at the individual state level. This is the case whether the state has incorporated the SBAC or PARCC consortium tests, purchased tests and assessments from Pearson, AIR or CTB, or developed its own state test through another test company. Very few states have deferred any action.”

Zandy continued, “Despite the large company pervasiveness in the test sector, some smaller companies have achieved success, such as eMetric with its advanced platform technology and the privately-held company Measurement Inc. that captured Tennessee’s large state test contract. The smaller Pacific Metrics that won major consortia contracts was acquired by ACT. Similarly, the ongoing digital content migration has created opportunities for start-ups and the traditional players in formative assessments. Renaissance Learning and NWEA are two companies that have distinguished themselves in the K-12 online formative testing sector.”

A copy of the EDUCATION INDUSTRY M&A REPORT FOR FULL YEAR 2014 is available at the Berkery Noyes website.