Education Week - June 11, 2014 - S24

TRENDS AND IDEAS
Ed-Tech Dealmaking
BY MICHELE MOLNAR
T
he increasing use of
data generated by
education technology
in K-12 is driving
more sophisticated
conversations
among dealmakers
looking to buy or
sell companies that serve schools.
Under the system that prevailed in
the market for years, a small group
of education companies dominated
the landscape because they could use
large sales forces to sell a wide variety
of products. That limited the ability
of smaller companies to emerge
and attract the attention of potential
buyers. But that environment is
changing.
Today, by looking at top mergers
and acquisitions in recent years, it's
possible to see the influence of educational
efficacy on business decisions,
said Deborah H. Quazzo, the founder
and managing partner of gsv Advisors,
a Chicago-based financial-advisory
company in the education sector.
"It was much harder to measure efficacy
in a world where we didn't have
data and digital learning," said Ms.
Quazzo.
Now, the "return on education" concept
should be the one driving companies'
value and viability rather than
the size of their sales forces, according
to Ms. Quazzo. To establish an
"roe," which is related to the business
concept of "roi," or return on investment,
Ms. Quazzo said companies
need to show the value of their products
using one of four results: "You're
either improving learning outcomes,
increasing access to education (think
moocs), driving down costs, and/or
improving leverage to the teacher
with a tool or platform that allows
teachers to access more students."
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Tracking Impact
Education Week asked gsv Advisors
to identify top mergers and acquisitions
in K-12 education over the past
five years, using criteria showing an
impact on education and the industry.
Ms. Quazzo pointed to companies
acquired this year that she said
demonstrated high efficacy: Truenorthlogic,
a Sandy, Utah-based professional-development
management
platform provider for educators; and
Imagine Learning, a Provo, Utahbased
language- and literacy-software
program for English-language
learners, special education students,
and early-childhood education. The
two were acquired by Weld North
llc, a New York City-based investment
company.
Gsv Advisors also searched for
transactions with significant impact
as "market validations," meaning
they demonstrated enough value to
attract more capital to the K-12 market.
The company also identified deals
that drew new interest to the market,
such as Amazon's entry into the K-12
marketplace with its acquisition of
math startup TenMarks in 2013-or
bellringers, such as the $1.1 billion
acquisition of Renaissance Learning
by Hellman & Friedman, a San
Francisco-based private-equity firm.
Ms. Quazzo cited three other examples
of market validations: News
Corp.'s acquisition of Wireless Generation,
an ed-tech company, in 2010,
which led to the formation of Amplify;
and the Pearson acquisitions in 2011
of Schoolnet, an instruction management
company, and Connections Education,
which operates Connections
Academy, a K-12 virtual education
program. They were "terrific market
validations," she said.
Validations from educators are
another matter, with several experts
saying most administrators and
teachers pay little attention to "who
owns what" in the ed-tech world.
David A. Irwin, who consults with
For a complete list of 2014 programs, visit
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S24 | NAVIGATING THE ED-TECH MARKETPLACE
EDUCATION WEEK * June 11, 2014
> www.edweek.org/go/edtechmarket
top school district officials in the
country in his capacity as managing
partner of the K-12 education practice
at Gartner Inc., an informationtechnology
research and advisory
company, said, "Obviously, [educators]
follow Pearson, and Pearson
gobbling up all the different vendors,"
he said. "I haven't heard them being
concerned about the larger conglomerates.
They get excited that [companies]
are finally coming to market
with solutions." n
Top Ed-Tech
Mergers and
Acquisitions
GSV Advisors LLC a
Chicago-based investment
bank that connects education
entrepreneurs and growth
companies with investors
identified major transactions
in the educational technology
marketplace over the past five
years for Education Week.
* McGraw-Hill Education's
purchase of Engrade, an
instructional-improvement
platform, in 2014, and ALEKS,
the developer of an adaptivelearning
technology, in 2013.
McGraw-Hill Education itself
was acquired by Apollo Global
Management LLC for $2.5
billion in 2012.
* Amazon Inc.'s 2013
acquisition of TenMarks, which
produces Web-based math
programs. That transaction
signaled the online retailer's
entry into education.
* Weld North's creation of
a K-12 holding company,
and its acquisition this year
of Truenorthlogic, an online
provider of K-12 talent
management, and Imagine
Learning, an elementary
language and literacy provider.
* Archipelago Learning's
acquisition by Plato Learning
in 2012, which created
edmentum, an online learning
provider.
* Blackboard's sale in 2011
for $1.64 billion to Providence
Equity Partners and 2012
acquisition of Moodlerooms,
an open-source learning
provider.
* Rosetta Stone's 2013
purchase of Lexia Learning,
an English-reading-product
company.
* Renaissance Learning's
acquisition this year by
Hellman & Friedman for
$1.1 billion.
* Wikispaces' sale in March
to TSL Education, a Londonbased
educational publisher
and worldwide teachers'
network. TSL was bought by
U.S. private-equity firm Texas
Pacific Group in 2013.
* News Corp's acquisition of
Wireless Generation, an edtech
company, in 2010, which
led to the formation of Amplify.
* Pearson's 2011 acquisitions
of Schoolnet, an instructionalimprovement
provider, and
Connections Education, the
operator of Connections
Academy, a virtual education
provider.
SOURCE: GSV Advisors LLC
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http://www.gse.harvard.edu/ppe/transform http://www.gse.harvard.edu/ppe/transform http://www.edweek.org/go/edtechmarket
Education Week - June 11, 2014

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