Many students had their first day of class this past Tuesday, with an estimated 50 million American public school children transitioning from Summer break to the school year over the past few weeks. Their schools largely reopened in an online-mic year not with the usual mixture of excitement, trepidation, and of new faces mingling with the familiar, but with frustration as widespread technical difficulties on software platforms Canvas and Zoom caused slowdowns and outages.
Much of the promise of EdTech seemed to wane after an initial spike in the early part of this past decade, with many providers shifting their focus from revolutionizing K-12 teaching towards graduate or post-graduate students and employer-focused, skills-based education. A year ago when we took a look at the broader education market, we noted the preponderance of deals in the $10-$49 MM EV range, and speculated that the sector may be primed for consolidation. This year we’re focusing on tech-related deals to get a better sense of this segment in light of the COVID-induced emphasis on remote learning services.
The number of EdTech deals closed by PE firms almost doubled from 14 in 2015, to 27 and 26 in 2016 and 2017, respectively. Deal volume nearly doubled again in 2018, hitting 45 total deals closed by sponsors before retracing to 40 deals in 2019. In the first half of 2020, the 15 total deals closed to sponsor buyers put deal activity on pace to slightly exceed 2016 and 2017 levels but fall well short of recent years. Q1 deal volumes are flat year over year, when comparing to 2018 and 2019, and met or exceeded deal volumes in eight of the past 12 quarters. An expected spike in transaction volume did not materialize in Q2, possibly due to the pandemic, as deal volume remained relatively flat. Out of 121 sell-side advisors active in the space since 2015, one-third of all deals were concentrated in the top 9 names as seen in the table below.
With elementary school districts struggling to balance state health guidelines, parental desires, and economically driven political demands, and universities such as Johns Hopkins touting “on-campus studios” for remote lectures, technology is rapidly taking a front row seat in our classrooms. This author can attest to the local school district focusing its budget surplus on equipping all students with Chromebooks and ensuring adequate high-speed internet access, something that was often only seen in private and not public institutions. In higher education, an informal poll by the newsletter Morning Brew saw only 4% of college students report their schools will have fully in-person teaching, with 64% leaning on hybrid models, and 32% on fully remote learning. With both local tax revenues and international student tuitions down, schools across the spectrum are grappling with budget shortfalls that necessitate investments in innovative solutions to continue to deliver their curricula.
August 30 – September 5
~114 deals traded
Valor Healthcare Inc., a Texas based primary care and mental health services provider serving U.S. veterans, was acquired by Trive Capital from Concentra Inc. Cain Brothers (division of KeyBanc Capital Markets) acted as the sell-side financial advisor and Dechert acted as the sell-side legal counsel. No terms were provided.
Most active subsectors
- IT: Software & services
- Industrial: Misc. equipment and products
- Services: Facilities maintenance and landscaping
- Services: Misc. asset light
Most active cities
- San Francisco
- New York