January 28, 2013 EDUCATION M&A REMAINS CONSTANT IN 2012, WITH LARGER DEALS OCCURRING IN THE FOURTH QUARTER

Berkery Noyes has issued its Education Industry M&A Report for Full Year 2012.

According to the firm’s latest research, transaction volume remained nearly constant on a year-to-year basis. However, aggregate transaction value fell 44 percent, from $11.93 billion in 2011 to $6.66 billion in 2012. The median revenue multiple between 2011 and 2012 stayed the same at 1.6x, while the median EBITDA multiple declined from 12.0x to 10.3x.

The two highest value education deals in 2012 both occurred in the fourth quarter. This consisted of the announced sale of McGraw-Hill Education to Apollo Global Management for $2.62 billion and Pearson’s acquisition of Embanet Compass for $650 million. Higher-Ed Media and Tech was the segment with the most notable rise in transaction volume, improving 59 percent since 2011. One of the segment’s largest deals over the course of 2012 was John Wiley & Sons’ acquisition of Deltak.edu for $220 million, which was announced in the fourth quarter as well.

As the migration to digital formats and delivery continue, the potential for transformation in the education industry that is succeeding at the post secondary level will continue to be substantial in all the education subsectors. In particular, the digital subscription model that is becoming more prevalent across the entire education spectrum, from K12 to professional/corporate training, is especially attractive to acquirers due to the visibility and recurring nature of the revenues.

“Acquirers are increasingly interested in e-learning solutions that will both complement and build upon their existing products,” said Mary Jo Zandy, Managing Director at Berkery Noyes. “With the implementation of the common core state standards and the related digital infrastructure, the value of e-learning will be enhanced.”