November 6, 2015 EDUCATION DEAL VOLUME AND VALUE SURGES IN THIRD QUARTER 2015

According to Berkery Noyes’ Education report for third quarter 2015, the number of deals increased 34 percent, from 91 to 122 transactions. Aggregate value rose 45 percent, totaling 6.8 billion in the third quarter. In terms of valuations, the median revenue multiple decreased from 2.4x to 2.0x, while the median EBITDA multiple declined from 11.5x to 10.3x.

The industry’s largest strategic transaction in third quarter 2015 and year-to-date was TPG Capital and Leonard Green Capital Partners’ announced acquisition of Ellucian, which provides higher education software, services and analytics, for $3.5 billion. Ellucian also made an acquisition earlier in the year with Helix Education’s learning management system (LMS) in the second quarter. Providing some more historical background, Hellman & Friedman acquired SunGard Higher Education from SunGard Data Systems for $1.8 billion in 2011. This resulted in a merger under a new holding company with Datatel, which was rebranded as Ellucian.

As for the combined Professional Training Technology and Services segment, volume increased 48 percent on a quarterly basis, from 29 to 43 transactions. In terms of high profile third quarter deals relating to the continuing medical education (CME) sector, Premier acquired CECity.com for $400 million; Wolters Kluwer Health acquired Learner’s Digest International for $150 million; and Relias Learning acquired Academy Medical.

Close to 90% of K-12 education spending in the U.S. is funded by state and local governments. Partially spurred on by the recession, and as the state and local budgets continue to recover, administrators are becoming more open to utilizing technology based solutions to effect outcomes in a cost-effective manner. Investors, in turn, have realized the secular change transforming the sector and have dramatically increased investment in the space.

“The education sector has been very active of late,” stated Mary Jo Zandy, Managing Director at Berkery Noyes. “In particular, companies that are online and digital are the most attractive acquisition candidates. Many companies are readily available to be acquired by private equity firms as well, which can borrow on attractive terms to purchase them.” Zandy continued, “It’s also worth noting that the education market seems to be bifurcated. Anything that has growth is selling for a nice multiple. But trying to sell a publisher that is print only is challenging and although print is still widely used in the classroom, the long-term trends favor digital content, data analytics, and assessment tools.”