Cherry Tree & Associates | December 2017 | Volume XII, Issue 6
SELECTED NEWS
Cogswell Education Agrees to Acquire DeVry University

Cogswell Education agreed to buy DeVry University from Adtalem Global Education (NYSE:ATGE), pending regulatory approval. Adtalem (formerly DeVry Education Group) stands to receive an earn-out based on DeVry’s performance over the next ten years.

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www.chicagotribune.com
Callidus Software Acquires Learning Seat from The Riverside Company 

Callidus Software (NASDAQ:CALD), a provider of sales performance management software, acquired Australia-based Learning Seat from The Riverside Company for $26.4 million. Learning Seat offers online compliance training and courses.

www.globenewswire.com



VitalSource Acquires Intrepid Learning

VitalSource, a digital learning platform, acquired Intrepid Learning, a corporate learning platform. The resources of both companies will be combined into a new brand called Intrepid by VitalSource. Terms were not disclosed.

www.geekwire.com
Scientific Learning Corporation Agrees to Acquire Brain Maps

Scientific Learning Corporation (OTCPK:SCIL), a provider of neuroscience-based educational technologies, agreed to acquire Brain Maps, a China-based provider of English learning services present in over 25 cities. Terms were not disclosed.

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www.businesswire.com
Procare Software Acquires KidReports

Procare Software, a provider of child care management solutions, acquired KidReports, a child care classroom management tool. Procare currently serves over 35,000 child care providers. Terms were not disclosed.

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www.businesswire.com
Digital House Raises $20 Million

Digital House, a set of Latin American schools that provide technology training, raised $20 million in Series B funding. The round was led by The Rise Fund, and also included Endeavor Catalyst and Omidyar Network. 

www.edsurge.com
Graduway Raises $12.7 Million

Graduway, a U.K.-based alumni outreach platform, raised $12.7 million. The round was led by Susquehanna Growth Equity. Graduway, which is used by more than 500 universities and organizations, has now raised $20 million to date.

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www.calcalistech.com
Springboard Raises $9.5 Million

Springboard, a provider of online career advancement courses, raised $9.5 million in a Series A round led by Costanoa Ventures. Learn Capital, Jyoti Bansal, Blue Fog Capital, Rocketship.vc and Moneta Ventures also participated.

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www.edsurge.com
Gakko Raises $6.5 Million

Gakko, a company that hosts educational summer camps for children, raised $6.5 million in a seed round. The round included a small group of Japanese investors. Gakko plans to use the funds to open a series of international learning centers.

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www.edsurge.com
Kaplan Professional Education Agrees to Acquire The College for Financial Planning from Apollo Education Group

Kaplan Professional Education, an operating unit of Kaplan, Inc., agreed to acquire The College for Financial Planning, which provides education services to financial advisors, from Apollo Education Group. Terms were not disclosed.

www.cnbc.com
Instructure Acquires Practice

Instructure (NYSE:INST), a leading SaaS-based learning management system company, has acquired Practice, a peer-to-peer video-based coaching platform. Practice has over 200,000 learners on its platform. Terms were not disclosed.

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www.prnewswire.com
Illuminate Education Acquires eduCLIMBER

Illuminate Education, a data analysis platform for K-12 schools, acquired eduCLIMBER, an academic data visualization tool. The eduCLIMBER tool is currently used by 250 school districts. Terms were not disclosed.

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www.edsurge.com
Thinkful Acquires Viking Code School and The Odin Project

Thinkful, a provider of web development education services, acquired Viking Code School and The Odin Project. Viking Code School offers online software development training, while The Odin Project is an open source platform. Terms were not disclosed.

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www.thinkful.com
iContracts Acquires Educadium’s EasyCampus

iContracts, a provider of contract management and compliance solutions, acquired Educadium’s learning management platform, EasyCampus. Terms were not disclosed.

www.prweb.com
Noodle Partners Raises $14 Million

Noodle Partners, a provider of online education management solutions, raised $14 million in Series A funding. The round’s sole participant was Owl Ventures. Noodle Partners previously raised $4 million in seed funding in October 2016.

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www.prweb.com
Code.org Raises $12 Million

Code.org, a non-profit focused on computer programming education, raised $12 million. The funding was provided by The Bill & Melinda Gates Foundation, Infosys Foundation USA, and PricewaterhouseCoopers. Code.org has now raised over $37 million.

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www.geekwire.com
Stone-Goff Partners Invests in DSG

DSG, a provider of sales training services to companies in North America and Europe, received an investment from Stone-Goff Partners, a New York-based private equity firm. The size of the investment was not disclosed. 

www.pehub.com
Phinma Education Holdings Acquires St. Jude College

Phinma Education Holdings, a subsidiary of Phinma Corporation (PSE:PHN), acquired St. Jude College, a Manilla-based educational institution, for $7.3 million. St. Jude College serves over 3,000 students, and is known for its health science courses.

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www.dealstreetasia.com
CHERRY TREE EDUCATION FOR-PROFIT 50 INDEX
For-profit education comprises more than 5% of the roughly $1.3 trillion that is spent on education in the U.S. annually. Cherry Tree created the Education For-Profit 50 Index representing a group of publicly traded for-profit education companies. 
The For-Profit Education 50 Index consists of companies in the Pre-K-12, Postsecondary Education, Training and Development, and Education Products and Services segments for-profit education industry.
* EV= Enterprise Value
MONTHLY COMMENTARY
We’ve had two reasons recently to reflect on the state of the education industry, and this month we’re going to focus on Pre-K-12. First of all, we start a new year in a matter of hours. Secondly, Chad recently finished four years of serving on the Board of the Education Technology Industry Network, a division of the Software and Information Industry Association in Washington, D.C. At their annual Education Business Forum in early December, we thought a lot about what has changed in the education industry in the past four years, and in the last ten since this newsletter was reborn.

What has changed, and where do we stand today?

The emergence of private equity. As we first predicted in 2011 while speaking at EdNET, PE backed companies are now one of the dominant forces in the education markets. They’ve continued to invest aggressively in sales and marketing, add-on acquisitions, and rationalized product development. Print publishers no longer set the agenda as they did ten years ago.

The shift to digital is gaining momentum. One of the main reasons print publishers have lost dominance, is due to the shift to digital resources. While innovation happens in companies of all sizes, including with large publishers, educators have been weaned away from a reliance on print, and have turned to an individually curated amalgam of products that might once have been niche or supplemental at best, as primary resources for their students.

Hardware prices continue to decline. The shift to digital could not have happened without prices coming down dramatically. We’re still not at a 1:1 ratio of devices to students, and given the associated costs of replacing, updating, and training on a variety of technology products, print may always be cheaper. But that no longer seems to matter, as many believe the benefits of technology far outweigh the costs.

The hardware, equipment, and computer/laptop/netbook markets are owned by firms specializing in serving the education market. This is not surprising to our regular readers, given what we all know about the uniqueness of this market: relationships and understanding the needs of educators has always been keys to effective sales strategies.

There are many more companies of scale. The landscape is now full of $20, $30, $50 million revenue companies, not to mention $100mm+ companies, growing, generating profits, and slowly but surely disrupting the traditional print markets. Many of them are generating the vast majority of revenues from subscriptions. These are some of the reasons private equity firms have found education an attractive market.

There are still opportunities for new innovators to shine. Companies such as Flipgrid and Seesaw are growing dramatically, reshaping the digital ecosystem by taking advantage of new technologies to do powerful things in ways print never could. We all know technology can individualize instruction, but when it can simultaneously engage learners, and support teachers (and teaching), then it can truly disrupt the legacy delivery models.

Focus on Effectiveness and the Implementation. It has always been important to “talk the talk,” to speak the language of educators, to understand their visions and pain points, and to show them how your product or service aligns with their objectives. But what we’ve seen in the performance of vendors over the past decade, is that buyers are increasingly focused on and attuned to what works. Perhaps the shift to subscriptions has made it easier for educators to vote with their feet, at least in curriculum, and certainly their past experiences with shelfware” has left them wiser.

I thoroughly enjoyed and appreciated my time on the Board of ETIN, and want to thank the many great colleagues and friends I served with; so many influential industry executives and brilliant thought-leaders with valuable perspectives. It was a great experience. 2017 on the whole was a terrific year. Here’s wishing everyone a fulfilling and productive 2018!
For a confidential conversation about your company's strategic alternatives for exiting, merging, acquiring, or obtaining venture financing, and how trends in education affect your prospects, please contact Chad Johnson.

Prepared by:
Chad Johnson, Managing Director
cjohnson@cherrytree.com | 952.253.6010


Cherry Tree & Associates is a private investment banking firm headquartered in Minneapolis. Our firm specializes in serving middle market companies and their owners, whether private, public, or divisions of larger corporations.
Important Disclosures

The information included in this publication has been obtained from public sources, and is not based upon private or confidential Cherry Tree information. Cherry Tree gathers its data from sources it considers reliable. However, it does not guarantee the accuracy or completeness of the information provided within this publication. Any opinions presented reflect the current judgment of the authors and are subject to change. Cherry Tree makes no warranties, expressed or implied, regarding the accuracy of this information or any opinions expressed by the authors. Officers, directors, partners of Cherry Tree and Cherry Tree proprietary investment funds may have positions in the securities of the companies discussed, and certain affiliates of Cherry Tree may recommend to specific clients the purchase and sale of securities discussed in the publication. This publication does not constitute a recommendation with respect to the securities of any company discussed herein, and it should not be construed as such. Cherry Tree or its affiliates may from time to time provide investment banking or related services to these companies. Like all Cherry Tree employees, the authors of this publication receive compensation that is affected by overall firm profitability. We undertake no obligation to update any information in this publication.  

The Education For-Profit (EFP) 50 Index is a hypothetical index, and does not reflect an actual investment portfolio. Comparisons between the EFP 50 Index and the S&P 500 are for illustrative purposes only. Correlations in performance information for the EFP 50 Index and the S&P 500 should not be relied upon as indicative of risks involved in owning or holding a portfolio of securities similar to the EFP 50 Index. Past performance should not be relied upon as indicative of future performance.