November 12, 2012 EDUCATION INDUSTRY TRANSACTION VOLUME STAYS CONSTANT

Berkery Noyes has issued its third quarter 2012 report for the Education Industry. Transaction volume increased two percent during the last three months. However, deal value in the industry, due to the absence of any transactions totaling over $100 million in third quarter 2012, declined 39 percent compared to the previous quarter.

Several of the largest transactions in third quarter 2012 were backed by private equity firms. This included Levine Leichtman Capital Partners’ acquisition of Mander Portman Woodward (MPW), a portfolio company of Apollo Group, for $85 million. Private equity acquirers have accounted for 59 percent of Education Industry transaction value thus far in 2012.

Meanwhile, strategic acquirers were responsible for 68 percent of transaction volume year-to-date, as opposed to 77 percent for the same timeframe in 2011.

One notable third quarter 2012 transaction in K-12 Media and Technology, a segment that remained nearly constant, was McGraw-Hill Education’s acquisition of Key Curriculum Press. This transaction emphasizes the importance of Science, Technology, Engineering, and Mathematics (STEM) digital technologies.

“With the implementation of the Common Core standardized curriculum, the focus on content is becoming less about differentiation and more about delivery through emerging technology platforms,” stated Mary Jo Zandy, Managing Director at Berkery Noyes. “Interactive assessment tools that measure student progress, particularly in the quantitative disciplines, will thus become even more important in K-12 education as schools aim to meet specific testing benchmarks.”

Regarding other market segments in the industry, M&A activity pertaining to educational institutions increased 33 percent in the last three months, including a 25 percent improvement within the Professional Training Institutions segment.

There are a few underlying factors contributing to the numbers in this report. The rapid adoption of e-Learning technology and the growing training needs of the existing corporate workforce, coupled with a tepid rate of new hiring, has led to a significant increase in corporate spending on outsourced training resources per employee. Due to the strong recent growth in the sector, corporate training and professional education companies continue to attract interest from strategic and financial acquirers.