March 11, 2013 EDUCATION TECHNOLOGY M&A ACTIVITY IMPROVES FOR THE THIRD STRAIGHT YEAR

Berkery Noyes’ quarterly education reports cover a wide range of industry segments. Since there is particular interest in education technology, we decided to highlight just the tech driven segments in this blog post. 

M&A activity in education technology increased five percent between 2011 and 2012, rising from 109 to 114 transactions. This represented a 25 percent improvement relative to the 91 transactions that occurred in 2010. Pearson had three of the top ten highest value education technology deals in 2012, two of which had values greater than $100 million. In addition, there were 30 financially sponsored transactions in the space over the past year, with an estimated value of $403 million. 

As seen in the graph below, education technology deal volume was especially strong in the first and fourth quarters of 2012. The only year-to-year decline occurred in the third quarter.

Upon examining data from the last three years, disclosed median enterprise value multiples for education technology companies were 2.1x revenue and 10.4x EBITDA. The median revenue multiple increased from 1.4x in 2011 to 2.9x in 2012, while the median EBITDA multiple declined from 12.0x to 9.3x. However, if the two highest value 2011 deals are omitted to provide a better snapshot of the overall market, the median EBITDA multiple actually rises from 8.5x to 9.3x.

2012 transaction volume and median multiples remained relatively constant in the aggregate education industry, which was noted in one of our prior blog posts. Yet as some of the information above illustrates, e-learning and online education businesses are continuing to generate strong interest and receive prime valuations from acquirers.