The 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.”
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:, a Sandy, Utah-based professional-development management platform provider for educators; and , a Provo, Utah-based language- and literacy-software program for English-language learners, special education students, and early-childhood education. The two were acquired by , a New York City-based investment company.
, 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.
•purchase of , an instructional-improvement platform, in 2014, and , the developer of an adaptive- learning technology, in 2013. McGraw-Hill Education itself was acquired by for $2.5 billion in 2012.
•2013 acquisition of , which produces Web-based math programs. That transaction signaled the online retailer’s entry into education.
•’s acquisition by Plato Learning in 2012, which created , an online learning provider.
•’s sale in 2011 for $1.64 billion to and 2012 acquisition of , an open-source learning provider.
•’s 2013 purchase of , an English-reading-product company.
•’ sale in March to , a London based educational publisher and worldwide teachers’ network. TSL was bought by U.S. private-equity firm in 2013.
•’s acquisition of Wireless Generation, an ed-tech company, in 2010, which led to the formation of .
•2011 acquisitions of , an instructional improvement provider, and , the operator of Connections Academy, a virtual education provider.
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 ofby 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 top school district officials in the country in his capacity as managing partner of the K-12 education practice at, an information-technology 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.”
Coverage of entrepreneurship and innovation in education and school design is supported in part by a grant from the Carnegie Corporation of New York. Education Week retains sole editorial control over the content of this coverage.
A version of this article appeared in the June 11, 2014 edition of Education Week as Ed-Tech Dealmaking