NEW YORK — October 15, 2015 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2015 mergers and acquisitions trend report for the Education Industry.

The report analyzes M&A activity for the sector during the first three quarters of 2015 and compares it with data covering 2014. 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.

According to Berkery Noyes’ research, the number of deals increased 34 percent, from 91 to 122 transactions. Aggregate value rose 45 percent, totaling $6.8 billion in the third quarter. In terms of valuations, the median revenue multiple decreased from 2.4x to 2.0x, while the median EBITDA multiple declined from 11.5x to 10.3x.

The industry’s largest transaction in third quarter 2015 and year-to-date was TPG Capital and Leonard Green Capital Partners’ announced acquisition of Ellucian, which provides higher education software, services and analytics, for $3.5 billion. Ellucian also made an acquisition earlier in the year with Helix Education’s learning management system (LMS) in the second quarter. Providing some more historical background, Hellman & Friedman acquired SunGard Higher Education from SunGard Data Systems for $1.8 billion in 2011. This resulted in a merger under a new holding company with Datatel, which was rebranded as Ellucian.

As for the combined Professional Training Technology and Services segment, volume increased 48 percent on a quarterly basis, from 29 to 43 transactions. In terms of high profile third quarter deals relating to the continuing medical education (CME) sector, Premier acquired for $400 million; Wolters Kluwer Health acquired Learner’s Digest International for $150 million; and Relias Learning acquired Academy Medical. Also of note outside the subsector, Relias Learning was acquired in 2014 by Bertelsmann for $540 million.

The Childcare Services segment saw nine transactions in the third quarter, a higher volume than during the previous two quarters combined. The segment’s largest deal in third quarter 2015 was Anchorage Capital Partners’ acquisition of Australian based Affinity Education Group, which owns and operates over 150 childcare centers, for $166 million. Meanwhile, one notable recent acquirer in the segment was Bright Horizons Family Solutions with the acquisition of U.K. based Active Learning Childcare, an operator of nine nurseries. Bright Horizons also completed a deal in the second quarter with the acquisition of Hildebrandt Learning Centers, which is based in Pennsylvania and operates 40 childcare centers in the Mid-Atlantic region.

Deal volume in the K-12 Media and Tech segment improved 67 percent from second to third quarter 2015, from 15 to 25 acquisitions. The segment’s largest transaction during the third quarter was Blackbaud’s acquisition of SmartTuition, a provider of payment software and services for private schools and parents, for $190 million. Blackbaud, a supplier of software and services to nonprofit organizations, also completed an education transaction in 2014 with the acquisition of Whipple Hill Communications for $35 million. WhippleHill provides cloud-based enrollment, learning, content, and student information management solutions to K-12 private schools. Regarding the Higher-Ed Media and Tech segment, transaction activity declined 29 percent over the past three months, from 24 to 17 acquisitions. This marked a return to its first quarter level.

“Close to 90% of K-12 education spending in the U.S. is funded by state and local governments,” said Peter Yoon, Managing Director at Berkery Noyes. “Partially spurred on by the recession, and as the state and local budgets continue to recover, administrators are becoming more open to utilizing technology based solutions to effect outcomes in a cost-effective manner. Investors, in turn, have realized the secular change transforming the sector and have dramatically increased investment in the space.”

“The education sector has been very active of late,” stated Mary Jo Zandy, Managing Director at Berkery Noyes. “In particular, companies that are online and digital are the most attractive acquisition candidates. Many companies are readily available to be acquired by private equity firms as well, which can borrow on attractive terms to purchase them.” Zandy continued, “It’s also worth noting that the education market seems to be bifurcated. Anything that has growth is selling for a nice multiple. But trying to sell a publisher that is print only is challenging and although print is still widely used in the classroom, the long-term trends favor digital content, data analytics, and assessment tools.”

A copy of the EDUCATION INDUSTRY M&A REPORT FOR THIRD QUARTER 2015 is available at the Berkery Noyes website.