Education Markets and Deals Roundup — 11th Edition
In May, we witnessed a number of transactions involving listed companies, as Bain Capital announced its acquisition of Powerschool for $5.6 Billion making it one of the largest transaction in education space. Thoma Bravo has also been reportedly looking to sell its majority stake in Instructure Holdings valued at $3 Billion.
Open AI’s announcement of Chat GPT-4o having multimodal capabilities, caused share prices of Duolingo and Chegg to drop, as overall public markets continue showed a downtrend, in the past month.
While globally private markets were active as several high value transactions were announced including Sterling Partners acquisition of Keypath Education for $187 Million, Zen Educate raising $37 Million from Round2 Capital and Pratika raising $35.5 Million from Blossom Capital; private markets in India were dormant.
I. Global
1. B2C
Duolingo — Chat GPT-4o was launched last month, post which duoling0 evidenced a loss of $340 million in market cap. OpenAI’s GPT-4o model is poised to disrupt language learning edtechs as it offers real-time language translation and multimodal capabilities across text, vision, and audio, positioning it as “the ultimate edtech utility” capable of replacing traditional methods with scalable, personalized learning experiences. Its enhanced accessibility features for visually impaired individuals and real-time interpretation abilities signal a transformative shift towards immersive and seamless language education.
IDP Education — Company anticipates a substantial 20–25% decrease in student placements over the next year due to regulatory shifts in ‘Big-4’ English-speaking study destinations viz. Canada, Australia, UK, USA . In response, IDP has announced job cuts and cost reduction measures, including a notable six percent reduction in its global workforce. While some students contemplate switching destinations due to policy changes, an increasing array of English-taught programs outside traditional hubs provides alternative options.
Coursera — Company is set to introduce new generative AI tools aimed at enhancing academic integrity and grading features for online courses. These tools, will assist professors in identifying potential instances of cheating without explicitly labeling students as cheaters. Instead, the tools analyze students’ responses to questions about their assignment choices and send the information to instructors. Coursera emphasizes that its approach differs from other AI plagiarism detection methods, focusing more on understanding students’ thought processes. The announcement follows ongoing debates in academia regarding the ethics and effectiveness of AI-based plagiarism detection tools.
Udemy — Company surpassed first-quarter revenue expectations, totaling $196.8 million, a 12% increase year-over-year. The B2B segment, Udemy Business, saw a robust 24% revenue growth, reaching $117.6 million, while B2C segment revenue experienced a slight decline. The company ended the quarter with $434.1 million in cash and marketable securities. Operational highlights for Q1 include the launch of GenAI Skills Packs aimed at fostering rapid adoption of generative AI skills and a partnership with The Cloud Native Computing Foundation was announced to support cloud native developers worldwide.
2. B2B
PowerSchool — Bain Capital announced its acquisition of Powerschool for 5.6 Billion taking the company private. The deal offers PowerSchool stockholders $22.80 per share in cash, representing a 37% premium over the unaffected share price. As per the terms of the agreement PowerSchool will continue as a standalone company under Bain Capital’s ownership. The acquisition aims to fuel growth and innovation, particularly in PowerSchool’s generative AI platform, PowerBuddy. Vista Equity Partners and Onex Partners will retain minority investments. The transaction is expected to close in the second half of 2024, pending regulatory approvals. Upon completion, PowerSchool will delist itself from the NYSE.
Instructure — Private equity firm Thoma Bravo is reportedly considering selling its majority stake in Instructure valued at $3 billion. JPMorgan has been appointed to gauge interest from potential buyers, including other buyout firms. Instructure, known for its Canvas learning management system, serves over 8,000 customers worldwide. The company went private in 2020 before returning to the stock market in 2021, has seen its shares struggle to surpass its IPO price amid increased competition in the education software market.
Wiley — Wiley announced it has carved out Wiley Edge, its Talent solutions agency which has been acquired by Inspirit Capital a London based investment firm that specialises in acquiring businesses that are no longer core to their parent company’s strategic objectives and require a different ownership structure to achieve their full potential. Inspirit Capital have rebranded Wiley Edge as mthree.
3. Indian Companies
Veranda — Company reported a net loss of ₹39 crore for the fourth quarter ended March 31, 2024, despite revenue doubling to ₹103 crore. The net loss was attributed to higher finance costs, including non-recurring expenses such as pre-closure charges of existing loans and unwinding of acquisition-related liabilities. Advertising and business promotion expenses for the quarter and full year amounted to ₹13 crore and ₹49 crore, respectively. For the full year, the company’s net loss was ₹76 crore, with revenue exceeding ₹362 crore. Increased finance and depreciation costs were incurred due to accounting adjustments related to completed acquisitions. The company achieved a positive EBITDA for the first time in FY24, driven by strategic consolidation of brands in its portfolio.
S Chand — In FY24, company achieved its highest operating revenues since FY19, increasing Gross and EBITDA margins, and a historic high in operating cash flows. The company also turned net debt-free with a substantial positive cash balance. Looking ahead, it anticipates stable gross margins and a single-digit price hike in FY25.
Although there was any funding activity in private markets in India, several hig value transactions were announced in the global education market.
Funding Rounds
Praktika, a language-learning app, offering personalized AI avatars that simulate human interaction to enhance the learning experience, recently secured a $35.5 million Series A funding round led by Blossom Capital. Startup has a 1.2 million active monthly users across 100 countries and nearly $20 million in revenue over the last year. The avatars adapt lessons based on user interaction, utilizing various accents and emotions to create a natural learning environment. Praktika leverages AI models like GPT-4 and GP Turbo, along with terabytes of interaction data, to continuously improve its functionality.
Zen Educate, an online marketplace connecting schools with teachers, raised $37 million in a Series B led by Round2 Capital. Company digitizes recruitment processes, offering flexibility and higher pay compared to traditional agencies. With the new funding, Zen Educate aims to expand its presence, launch new software for school administrators, and pursue acquisitions, including its recent purchase of Aquinas Education. Former soccer player Jermaine Jenas joins as a brand ambassador post-acquisition. The Series B round also saw participation from Adjuvo, Brighteye Ventures, FJ Labs, Ascension Ventures, and several angels.
Elevate K-12 has raised growth capital of $24 million from Trinity Capital. Elevate addresses teacher vacancies by delivering live instruction from state-certified teachers. Recognized as one of Forbes’ America’s Best Startup Employers for 2024, Elevate aims to expand its reach and operations with the new funding. Elevate’s CEO highlighted the capital infusion’s significance in accelerating their efforts to meet the educational needs of schools, districts, students, and teachers.
Campus.edu raised $29 million in funding from marquee investors like Sam Altman, Jason Citrin, Dylan Field and others. Campus.edu offers accessible community college education with online and in-person associate degrees and certificate programs. Its diverse faculty, including professors from top universities, ensures quality education at affordable rates, often below the Pell Grant maximum. Campus aims to democratize learning and alleviate student debt. Campus plans to expand its reach, enhance its technology platform, and invest in faculty recruitment.
M&A Deals
Keypath Education — Sterling Partners, already the majority shareholder of Keypath, is set to acquire all outstanding shares, making Keypath its sole owner for approximately $187 million. Acquisition aims to provide liquidity to Keypath investors amidst challenging market conditions for online program management companies (OPMs). Despite Keypath’s strong Q3 revenue growth, the lack of liquidity has been a significant concern. The move reflects ongoing industry consolidation, with OPMs facing economic and enrollment challenges. The acquisition is not expected to result in significant operational changes for Keypath, which remains committed to its current strategy under Sterling Partners’ ownership.
Brainier LMS — ClearCompany has acquired Brainier Solutions Inc., a leading provider of cloud-based learning management systems (LMS). The acquisition aims to enhance ClearCompany’s talent management suite by incorporating Brainier’s award-winning LMS platform.
Both companies emphasize the importance of continuous learning and development in talent management.
Brainier’s CEO sees the partnership as an opportunity to further impact learning and development in talent management. Financial terms of the acquisition were not disclosed.
