Why have some subsectors within education seen a recent spike in deals, while others have not?
The post-secondary space has had few transactions due to declining enrollment and regulatory concerns. In the cyclical corporate and professional training sector, companies have shown good top-line growth and profitability recently. Spending on training and perks to retain existing employees has become more important. In preschool through 12th grade, there's interest from strategic and financial buyers because the sector is shifting from print to digital tools, improving teacher efficacy.
What can we expect from private equity firms?
In the next 12 to 24 months, we may see an increasing amount of M&A activity from private equity since the education sector overall has shown resilience in the volatile economy. Moreover, the modality of instruction is shifting to a blended or online solution, and the subscription-based Software-as-a-Service model is becoming more prevalent, attracting financial sponsors.
How might M&A change the education sector in coming months?
New business models are being developed across all aspects of a student's life. The proliferation of new companies and the speed of change will necessitate some consolidation. In preschool through 12th grade, players are trying to provide a more comprehensive solution by combining content with digital tools. In the post-secondary space, M&A activity will address Department of Education requirements to have revenues not based on federal loans or grants.