NEW YORK — January 29, 2014 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2013 mergers and acquisitions trend report for the Education Industry.

The report analyzes M&A activity in the sector during 2013 and compares it with data covering 2011 and 2012. 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.

Transaction volume increased eight percent on a year-to-year basis. Aggregate value rose 27 percent, from $8.04 billion to $10.20 billion. The median revenue multiple remained constant at 1.5x, while the median EBITDA multiple declined from 13.5x to 11.0x. This marked a return to the industry’s 2011 EBITDA valuation. Financial sponsors accounted for 22 percent of transaction volume and 54 percent of value in 2013, compared to 30 percent of volume and 63 percent of value in 2012.

In terms of strategic buyers, Pearson was the industry’s most active overall acquirer with six transactions in 2013. The largest of these deals was Pearson’s acquisition of Grupo Multi, an English language training company headquartered in Brazil, for $829 million. Meanwhile, Rosetta Stone was another notable acquirer with three transactions. This consisted of global language software business Tell Me More for $28 million; reading technology company Lexia Learning Systems for $24 million; and online language learning community Livemocha for $9 million.

As for specific market segments in the report, Higher-Ed Media and Tech deal activity saw an 11 percent improvement between 2012 and 2013. At the same time, the number of transactions in the K-12 Media and Tech segment increased six percent. Deals by notable acquirers in the K-12 Media and Tech segment throughout the past year included Amazon’s acquisition of TenMarks Education, a provider of web-based math programs; Discovery Communications’ acquisition of Espresso Group, a digital curriculum service; and Intel’s acquisition of Kno, an interactive education software company that digitizes textbooks.

“Importantly in K-12 education, a transformation is occurring from the top levels on down due to technology and innovation, some elements of which have succeeded at the post secondary level,” said Mary Jo Zandy, Managing Director at Berkery Noyes. “For instance, as textbooks go digital, positive outcomes can be a digital subscription model with no rentals or used books.” Zandy continued, “In addition, the new initiatives in K-12 education focus on school-level accountability and measurable results. Many of the traditional education companies will be looking to add to their capabilities through acquisition in areas of adaptive learning and common core testing and assessments.”

“The large education players continue to acquire to help manage their transformation from print to digital, strengthen their presence in new emerging markets and increase their services-related revenue streams,” added Peter Yoon, Managing Director at Berkery Noyes. “Higher-Ed institutions are looking to expand their online programs and outsource elements of the student life cycle to reduce costs with the emergence of software-based solutions. K-12 schools are implementing the rollout of tablets, while corporate training providers and childcare services companies are seeing the benefits of an improving economy.”  

Yoon continued, “Given the quickening pace of change in overall market, we expect M&A activity to continue across the entire education spectrum. Among many areas, demand should remain strong for companies that provide solutions and services for professional education, English language training and childcare.”

A copy of the EDUCATION INDUSTRY M&A REPORT FOR FULL YEAR 2013 is available at the Berkery Noyes website.