Making the Grade – K-12 Deal Activity Continues to Flourish

In April, we reported on an increased appetite among investors for the K-12 sector, marked by larger, later-stage deals. This trend has continued through Q2 and Q3 of 2021. Up-and-coming names in K-12 educational assessment (Formative) and academic support services (Paper) have raised unprecedented amounts in recently announced Series A and C financings. Similarly, innovative content and platform providers are being acquired at very healthy multiples, sparking interest in where these businesses will go next. 

We’re witnessing a new wave of teacher-centric businesses aiming to make assessment, the use of data, and instruction, among other services, much more intuitive and interconnected.

For its part, Tyton’s consulting team provided active due diligence support on several closed K-12 transactions and our investment banking team assisted with seven K-12 related deals in the first half of 2021. The range of deals we have worked on – from administrative platforms to instructional technology and summer enrichment programs – is indicative of the high volume of deal activity happening across the entire spectrum of pre-K-12.

As always, we value your perspective and feedback. Share your thoughts and let us know what is most interesting to you at this exciting inflection point in the K-12 ecosystem.

As Robust Deal Activity Persists, What Can We Learn?

K-12 is coming-of-age from an investor perspective

Blockbuster deals in the K-12 ecosystem suggest that the sector may finally be generating the same level of enthusiasm and interest previously reserved for other sectors (e.g., corporate training) with more compelling buying dynamics. Since 2010, our analysis shows that the amount of dollars invested in corporate training has far exceeded that of K-12, and the average deal size in the corporate sector – nearly $40M – more than doubles that of K-12. Formative’s $70M raise – for a minority position – and Paper’s $100M raise, both announced in June, as well as GoGuardian’s $200M financing, are relative high-water marks for North American-based K-12 businesses.

These transactions are about more than simply the considerable availability of capital seeking out deals. Rather, they highlight the union of innovative K-12 offerings and successful district customer acquisition strategies resulting in compelling, viable growth trajectories. Unlike the earlier wave of high-flying K-12 freemium players with considerable adoption but often meager (revenue) conversion, these players – and others such as Panorama Education and PresenceLearning – are making the sale.

Early childhood education leaders seek their next act, while others seek the stage 

Enthusiasm for early childhood remains high and the last month revealed new resources for two market leaders. KKR’s acquisition of Teaching Strategies and EducationPerfect and Age of Learning’s $300M capital raise could be viewed as a proverbial case of the “rich getting richer”. Both are leaders in their respective segments, which, notwithstanding the success and scale of these two players, remain highly fragmented.

For Teaching Strategies and Age of Learning, the key question is – “Where next?” Both players have launched new offerings to diversify away from their core, and many are watching to gauge their success in building out second and third pillars. For much of the rest of the market – both participants and investors – how best to capture some of states’, districts’, and parents’ spending is paramount. With strong, broad-based understanding among policymakers and practitioners of the benefit of quality early-childhood education experiences, this space should see strong momentum.

Curriculum providers on the move (again) 

This summer we’ve watched market-leading players previously (relatively) quiet on the M&A front jump into the fray. Edmentum won the Apex Learning sweepstakes, while its key rival, Weld North Education went international with the acquisition of UK-based Twig Education. Stay tuned for how these two courseware category leaders navigate the post-pandemic environment in supporting districts’ increasingly complex classroom-based and online learning needs.

Curriculum Associates and DreamBox Learning both announced two acquisitions last month, delivering on months – if not years – of speculation as to when and what they would do to add to their strong core solutions. Curriculum Associates added Mentoring Minds (Tyton Partners advised Mentoring Minds) and Ellevation, the latter which will retain its brand and operate as an independent subsidiary. DreamBox announced the acquisition of ReadingPlus and Squiggle Park, securing evidence-based programs designed to boost students’ K-12 literacy skills and more than doubling its addressable market by gaining access to districts ELA spend.

The dizzying array of deals is by no means over, and we expect to see more notable announcements before year-end. The K-12 instructional content market finds itself undergoing a significant transition, catalyzed by COVID-19 and investors’ cash. Stay tuned.

Bottom Line

Deal value and volume shows no signs of slowing down in the K-12 sector. Companies and investors are jockeying for position in the wake of districts, schools’ and parents’ education reboot – which is still very much a work-in-progress – following the tumult wrought by the pandemic. Moreover, the IPOs of two significant K-12 players – PowerSchool and Instructure – will introduce a new form of currency (i.e., publicly traded stock) that the K-12 market hasn’t seen in earnest in many years.

In Case You Missed It

Despite recent announcements that many of the nation’s largest school districts are planning to return to fully in-person instruction for the 2021-2022 school year, nearly half of parents say they will continue many of the remote and hybrid learning models adopted in response to pandemic-related school shutdowns. That is according to findings from the second publication in Tyton Partners’ “School Disrupted” series, developed with support from the Walton Family Foundation.

Built on a survey of more than 2,500 people, the “School Disrupted” report aims to understand parent and caregiver decisions to switch or supplement their child’s school, while digging deeper into their underlying motivations, satisfaction with their choices, and expectations for the future.

For more information and to download the full report at no cost, visit our website.