Widening skills gap is driving deal activity tied to education in HCM

Since the beginning of the pandemic, large-sized deals in pre-K-12 and postsecondary have garnered lots of attention as they point to scale in the acceleration of digital learning. Recent notable examples include Kahoot’s $500M acquisition of Clever, 2U’s $800M acquisition of edX, and Platinum Equity’s acquisition of McGraw Hill for $4.5B, which we split evenly between pre K-12 and postsecondary based on McGraw Hill’s revenue segmentation in 2020. However, deals of notable size (i.e., ≥ $100M) are less common in these markets than in HCM. This is not unexpected as the overall market size of HCM is conservatively 2-3x larger than postsecondary, the next closest market by size. Moreover, not all deal activity in HCM is tied to education in the teaching and learning context.

But many deals, like Articulate’s unprecedented $1.5B Series A raise in the beginning of July, are tied to teaching and learning. Now valued at $3.75B, Articulate aims to simplify course authoring for companies transforming from instructor-led to online training. Articulate’s raise and valuation speaks to teaching and learning to overcome the persistent skills gap and to address companies’ needs to upskill and reskill their employees. This trend is echoed by Guild’ similar $3.75B valuation as part of a $150M Series E round, as well as Vista Equity Partners acquisition of Pluralsight for approximate enterprise value of $3.8B. Both deals speak broadly to the skills gap, but also to the skills gap among lower-income workers (Guild) and among technology skills (Pluralsight), respectively. And early and growth stage deals aligned to this trend are also occurring, to include our recent representation of Product School as it secured $25M in growth equity to accelerate product management training through partnerships with Fortune 500 companies.

Looking forward, we anticipate the teaching and learning trend to continue in earnest as remote working is reported to have only widened the gap for critical technology skills, and pre-pandemic trends accelerate leading up to potentially 25 percent more workers needing to switch occupations.