NEW YORK — January 25, 2017 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2016 mergers and acquisitions trend report for the Education Industry.
The report analyzes M&A activity in the sector during 2016 and compares it with data covering 2014 and 2015. This market includes information and technology companies servicing the Education Industry, including the K-12, Post-Secondary, Childcare Services, and Corporate & Professional Training segments.
Transaction volume decreased 11 percent on a year-to-year basis. This followed a 29 percent increase in 2015. Strategic volume over the past year moved downward 15 percent, from 320 to 271 deals. Sponsored activity remained almost constant during this timeframe, from 106 to 107 transactions.
Aggregate value fell 70 percent, from $17.75 billion to $5.32 billion. This followed a 50 percent increase in 2015. Of note, there were seven deals in 2016 with disclosed values above $100 million, as opposed to 19 such deals in 2015. The largest Education transaction in 2016 and the only one with a disclosed value above $1 billion was Apollo Education Group’s announced acquisition by a consortium of investors for $1.1 billion.
The median revenue multiple year-over-year moved slightly from 1.9x to 2.0x, while the median EBITDA multiple saw a minor shift from 9.2x to 8.7x. Over the past three years, deals in the $10-$20 million range received a median enterprise value multiple of 2.0x revenue, compared to 2.2x revenue for those in the $20-$80 million range and 2.9x revenue for those in the $80-$160 million range and above.
The K-12 Media and Tech segment experienced a 19 percent yearly increase in volume, making it the sector with the largest annual gain. PowerSchool Group was active in the segment during 2016 with the acquisitions of Chalkable, a provider of education data management, student achievement and professional learning solutions to the K-12 public and private school markets; SRB Education Solutions, which offers complementary administrative and ERP solutions for K-12 school boards and districts in Canada; HAIKU Learning Systems, a cloud-based learning management system; TIENET, a software suite designed to help schools manage instructional, assessment and other educational services for special needs students; and Interactive Achievement, an instructional assessment software and analytical solutions company that serves school districts.
Other high profile acquirers in the K-12 Media and Tech segment during the year included Chegg with the acquisition of Imagine Easy Solutions, a provider of online writing tools that help students properly use citations, bibliographies, and other reference capabilities, for $42 million with additional payments of up to $18 million; McGraw-Hill Education with the acquisition of Redbird Advanced Learning, a digital personalized learning company; Weld North’s acquisition of Intellify Learning, a learning data management and analytics solutions company; and Apple’s acquisition of LearnSprout, an online data insight service used by K-12 educators to track student performance.
As for other select markets covered in the report, volume in the Higher-Ed Media and Tech segment declined by slightly more than half, which marked a return to its 2014 level. Deal volume in the Professional Training Technology segment remained about constant on an annual basis for the third consecutive year. However, activity in the Professional Training Services segment, following a 22 percent rise in 2015, fell 36 percent.
Notable transactions in the combined Professional Training segments in 2016 included Leeds Equity Partners’ growth equity investment in Project Management Academy, which teaches over 400 courses annually to more than 8,000 students, and offers in-house training to corporations; Renovus Capital’s investment in Red Nucleus Solutions, a design and development provider of learning solutions for the life sciences industry; OnCourse Learning’s acquisition of the Institute for Professional Care Education, a training and compliance solutions company that serves home care providers and home health agencies; and Strayer Education’s acquisition of New York Code & Design Academy, a provider of non-degree web and mobile app development courses.
“Companies in cyclical sectors such as corporate training tend to benefit from an improving economic environment and are continuing to draw interest from acquirers,” stated Peter Yoon, Managing Director at Berkery Noyes. “Consolidation and market growth is being spurred on by players who can provide the full breadth of human capital management software and services including core HR, workforce management, recruiting, training, performance reporting, compensation and other functions.”
“In the important selling season, it appears that print textbook sales were below industry expectations with distributors with high inventories,” said Mary Jo Zandy, Managing Director at Berkery Noyes. “As textbooks go digital, many of the channel problems will be alleviated. Digital most frequently has a subscription revenue model with no rentals or used books.” Zandy continued, “The innovation occurring in the education technology sector bodes well for future M&A activity, especially as bridging the learning gap continues to be a high priority. Many publishers have built or acquired potentially important platforms for students, faculty and administrators to improve outcomes from the education process.”
A copy of the EDUCATION INDUSTRY M&A REPORT FOR FULL YEAR 2016 is available at the Berkery Noyes website.