NEW YORK — October 27, 2014 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2014 mergers and acquisitions trend report for the Education Industry.
The report analyzes M&A activity for the sector during the first three quarters of 2014 and compares it with data covering 2013. This market includes information and technology companies servicing the Education Industry, including the K-12, Post-Secondary, Childcare Services, and Corporate and Professional Training segments.
According to Berkery Noyes’ research, the number of deals year-to-date saw a slight three percent decline compared to the corresponding timeframe in 2013. The largest quarterly increase occurred between fourth quarter 2013 and first quarter 2014, from 73 to 84 deals. Transaction value gained 35 percent on a year-over-year basis, totaling 8.04 billion thus far in 2014. In terms of valuations, the median revenue multiple increased from 1.6x to 2.5x, while the median EBITDA multiple remained nearly constant at 11.1x.
The highest value transaction across the industry’s tech-based segments in third quarter 2014 was Heartland Payment Systems’ acquisition of TouchNet Information Systems. The provider of payments and integrated commerce solutions to the Higher-Ed market was acquired for $360 million. In addition, Heartland Payments Systems completed another industry deal in second quarter 2014 with the acquisition of MCS Software, a foodservice point-of-sale and online payment solutions company that serves K-12 schools.
As for the Professional Training Technology segment, one high profile acquirer in third quarter 2014 was SkillSoft, which acquired SumTotal Systems, a provider of cloud-based human resources services. This followed Skillsoft’s acquisition by Charterhouse Capital Partners for $2.3 billion in first quarter 2014. Meanwhile, there were several notable deals in the Medical Education sector over the past three months. This included Baring Private Equity Asia and Altas Partners LP’s acquisition of St. George’s University for $750 million and 3D Systems Corporation’s acquisition of Simbionix for $120 million.
Other transactions by notable acquirers in third quarter 2014 included Tutor.com’s acquisition of The Princeton Review, a test preparation and college admissions business; and Blackboard’s acquisition of CardSmith, a provider of cloud-based card processing solutions that serves both the Higher-Ed and K-12 markets.
“A confluence of factors continue to help shape the evolving education sector,” said Peter Yoon, Managing Director at Berkery Noyes. “This includes rising local and state tax revenues, the adoption of innovative pedagogical and blended learning tools, continued investment in early stage edtech companies, and an increasingly receptive buyer universe, consisting of the larger strategic players who are now able to focus a bit more externally and a surging number of financial sponsors who have interest in the space.”
“In the K-12 sector, technology investments will continue to drive state and school district expenditures,” said Mary Jo Zandy, Managing Director at Berkery Noyes. “Ed sector M&A will be strong and with particular interest in learning platforms and data reporting and analytics. Other areas of interest include hybrid student information systems and of course digital content and tools,” continued Zandy. “In the Higher-Ed market, operational solutions that help institutions reduce infrastructure by combining various functions and also outsourcing solutions are in demand by acquirers as well.”
A copy of the EDUCATION INDUSTRY M&A REPORT FOR THIRD QUARTER 2014 is available at the Berkery Noyes website.