January 2017
Volume XI, Issue 7
Educational Testing Service to Acquire Questar Assessment for $127.5 Million
Educational Testing Service, a non-profit developer, administer, and grader of more than 50 million tests annually, has announced it will acquire Questar Assessment (OTCPK:QUSA) for $127.5 million in cash or approximately $2.80 per share. Quester Assessment, a Minneapolis-based company, is a K-12 assessment solutions provider focused on building a bridge between learning and accountability
Macmillan Learning Acquires Intellus Learning
Macmillan Learning, a New York-based educational book publisher and digital tools provider, has acquired Intellus Learning, an educational platform-as-a-service company. Intellus Learning's platform helps higher education institutions select the best content for each student and more efficiently allocate resources through the use of intelligent analytics. Terms of the deal were not disclosed
Interfolio Acquires Data180
Interfolio has acquired Data180, a Washington, D.C.-based provider of a faculty activity reporting platform. Interfolio already offers a broad suite of tech solutions for higher education faculty, including solutions related to hiring, promotion, tenure, and governance. Interfolio hopes to now offer a single platform that streamlines many of the manual, administrative processes concerning faculty at higher education institutions. Terms of the deal were not disclosed
Pearson Seeks Buyers for Penguin Random House Stake  
Pearson (LSE:PSON), a London-based provider of educational materials and learning technologies, has decided to pursue a sale of its stake in Penguin Random House after 2016 performance came in well-below expectations. Pearson's performance was especially poor in the North American market, where revenue declined by 18% compared to 2015. Pearson currently holds a 47% stake in the book publisher with German publisher Bertelsmann controlling the remaining 53% of the company
Laureate Education Announces IPO Plans
Laureate Education (NASDAQ:LAUR), a provider of higher education degree programs, announced plans to raise nearly $500 million in its initial public offering (IPO). The company plans to sell 29 million shares, which will likely be priced between $17 and $20. The company plans to use the proceeds to pay down its existing debt. Laureate Education has been planning its IPO for more than a year, but it has suffered setbacks from student lawsuits, a scandal related to former President Bill Clinton, and other issues
Curriculum Associates Donates Shares to Iowa State University Foundation
Curriculum Associates, an education publishing company with more than $190 million of sales in 2016, has donated a majority of its shares to Iowa State University Foundation. Curriculum Associates' primary motivation was to find an acquirer with a long-term mindset, rather than one who would be focused on short-term gains. If an acquisition occurs in the future, Chief Executive Officer Rob Waldron will be able to choose the buyer and Iowa State University Foundation will receive cash for its shares
Xuebajun Raises $100 Million
Xuebajun, a Shanghai-based provider of a homework app, has raised $100 million in Series C Funding led by EasyCapital and China Merchants Capital. On Xuebajun's app, students can take pictures of homework and quickly receive an answer to their questions. The company had previously raised $50 million in August 2014
PSI Services Acquires Software Secure
PSI Services, a provider of pre-employment testing, licensure, and certification testing solutions, has acquired Software Secure, a developer of testing solutions for distance learning programs. Software Secure claims to have over 400 customers internationally, mainly comprised of higher education institutions, K-12 schools, and certification programs. Terms of the deal were not disclosed
Sterling Partners Invests in Amerigo Education
Sterling Partners, a Chicago-based private equity firm, has invested an undisclosed sum in Amerigo Education, a provider of support services for international students at U.S. high schools. Amerigo Education's program is designed to help students achieve admittance into a top 200 American university. Terms of the deal were not disclosed
LivingTree Acquires Class Messenger
LivingTree, developer of a private, social network for K-12 education, has acquired Class Messenger, a communication application designed for teachers and parents. Class Messenger offers a two-way messaging service where teachers and parents can securely and directly contact each other. LivingTree was acquired in December 2016 by Dean Drako, founder of Barracuda Networks and CEO of Eagle Eye Networks
Azzur Group Acquires Learnaboutgmp
Azzur Group, a Pennsylvania-based private equity firm, has acquired Learnaboutgmp, provider of a cloud-based learning management system for life science organizations. Learnaboutgmp offers regulatory compliance courses to biotechnology, pharmaceutical and medical device companies. Terms of the deal were not disclosed
Brentwood Associates Invests in ClassWallet
Brentwood Associates, a Los Angeles-based private equity firm, has invested an undisclosed sum for a minority position in ClassWallet, developer of a funds management and tracking platform for schools. The company claims its platform is used in more than 850 schools in the U.S. ClassWallet plans to use the proceeds to accelerate its product roadmap and further develop its sales and marketing efforts
Cuemath Raises $15 Million
Cuemath, an India-based provider of after-school math classes, has raised $15 million in Series B funding led by CapitalG, the venture capital arm of Alphabet (NASDAQ:GOOGL), with participation from Sequoia Capital India. The company claims its classes are currently used by more than 10,000 students in India. Cuemath plans to use the proceeds for business expansion and product development
Credible Raises $10 Million
Credible, provider of a student loan marketplace, has raised $10 million in Series B funding led by Regal Funds Management, an Australian hedge fund. Prospective college students can submit their information on Credible, who sends it to 16 different lenders. Students can then view firm offers of credit and choose the loan that best suits their situation
The Noodle Companies Raises $5 Million
The Noodle Companies has raised $5 million in Series A funding from SWaN & Legend Venture Partners. The Noodle Companies is comprised of four education technology subsidiaries:, Noodle Markets, Noodle Partners, and Noodle Pros. The four entities work independently and in unison to further the goal of creating better transparency and efficiency in education
Authentica Solutions Acquires PIP Learning Technologies
Authentica Solutions, a provider of education platform-as-a-service solutions, has acquired PIP Learning Technologies, developer of the Trust Platform. The Trust Platform is an online platform that protects student data and also connects teachers to online applications. Terms of the deal were not disclosed
OOHLALA Mobile Raises $5.3 Million
OOHLALA Mobile, developer of a campus app focused on improving engagement and retention, has raised $5.3 million from University Ventures, Real Ventures, GoAhead Ventures, Y Combinator, and others.  The company currently claims to serve over 200 higher education institutions, including Rutgers University, Harvard Law School, and McGill University
Lingo Live Raises $5.2 Million
Lingo Live, developer of an online platform for improving English language skills, has raised $5.2 million in Series A funding led by Owl Ventures with participation from Fresco Capital, Alpine Meridian Ventures, and others. Lingo Live primarily targets international engineers, whose services are increasingly demanded by fast-growing technology companies. The company plans to use the proceeds to further expand its platform's capabilities
Speakaboos Acquires Homer
Speakaboos, provider of a reading app for ages 2-6, has acquired Homer, provider of a learn-to-read program available via desktop, iPad, or iPhone. Speakaboos currently offers more than 200 interactive storybooks and songs. The acquisition will create a single entity with the sole aim of improving literacy skills in young children. Terms of the deal were not disclosed
J.H. Whitney Capital Partners Acquires 3B Scientific
J.H. Whitney Capital Partners, a Connecticut-based private equity firm, has acquired 3B Scientific, a German manufacturer of anatomical and biological teaching aids for science, training, and patient education applications. 3B Scientific has a significant international presence with representation in over 100 countries. Terms of the deal were not disclosed
SecureSet Academy Raises $4 Million
SecureSet Academy, a cybersecurity bootcamp, has raised $4 million in Series A funding led by the Colorado Impact Fund, a venture capital firm focused on investing in Colorado-based companies. SecureSet Academy offers a 752-hour curriculum that can be completed in 20 weeks and includes courses in network security, system security, applied crypto, and other topics
Unacademy Raises $4.5 Million
Unacademy, provider of India's largest learning platform, has raised $4.5 million in Series A funding from Nexus Venture Partners, Blume Ventures, and others. Unacademy's platform currently holds more than 500 courses and over 200,000 active users. The company plans to use the proceeds to increase its presence in the topics of exam preparation, language learning, and professional growth
Teachable Raises $4 Million
Teachable, a New York-based developer of a platform to create and sell online courses, has raised $4 million in a round of funding led by Accomplice, a Massachusetts-based venture capital firm. The company claims its platform has been used by more than 3 million students. Teachable plans to use the proceeds to hire new personnel and invest in product development, user experience, and growth
Adaptemy Raises $3.2 Million
Adaptemy, an Irish educational technology and services company, has raised $3.2 million in a round of funding from Folens Publishing Company and Enterprise Ireland. Adaptemy primarily works with leading educational publishers to create personalized learning programs. The company plans to use the proceeds to expand operations
Querium Raises $3.2 Million
Querium, creator of a mobile learning software platform designed to improve STEM skills, has raised $3.2 million in Series B funding led by Wild Basin Investments with participation from Crossfire Holdings, Ingram Content Group, and SustainVC. Querium's platform helps students prepare for college through personalized lessons and tutoring assistance in STEM subjects. The company plans to use the proceeds to expand operations
Show My Homework Raises $3 Million
Show My Homework, an online platform where teachers can post and assess homework assignments, has raised approximately $3 million in seed funding from Localglobe, a British venture capital firm. The London-based company claims its platform is currently used by half of London's secondary schools. Show My Homework plans to use the proceeds to expand beyond Great Britain
AdmitHub Raises $2.95 Million
AdmitHub, creator of a support platform for college students, has raised $2.95 million in seed funding led by Relay Ventures and Reach Capital with participation from University Ventures and other investors. AdmitHub's platform relies on conversational artificial intelligence (AI) to send students reminders, guidance, and answers to any questions asked. The company plans to use the proceeds to expand internationally, specifically by growing its AI and sales teams
ClearScholar Raises $1.25 Million
ClearScholar, developer of a student engagement platform for higher education institutions, has raised $1.25 million in seed funding from Elevate Ventures, High Alpha, Butler University Endowment, and individual investors. The company plans to use the funds to hire new personnel for sales, marketing, and product development
LCI Education Network Acquires The Art Institute of Vancouver
LCI Education Network, a Canadian operator of higher education campuses around the world, has announced it will acquire The Art Institute of Vancouver, a post-secondary educational institution focused on teaching the arts. The Art Institute of Vancouver offers programs in film and television, video game programming, digital film and video, graphic design, and other subjects. Terms of the deal were not disclosed
Capzanine Acquires EduServices
Capzanine, a Paris-based private equity firm, has acquired EduServices, a provider of vocational courses and training, from Duke Street LLP. EduServices' courses and training primarily address the fields of sales, accounting, communication, and hospitality. The company generated 99 million euros of revenue in 2016
MC Monthly Commentary:

Valuations continue to moderate in the education M&A markets, as they have in the broader M&A world. As we look back on 2016, it was clear that valuations have come down from late 2014 to mid 2015 levels. This is being seen in M&A markets as a whole, and largely reflects the tension between buyers being more careful, while still sitting on large amounts of cash they want to put to work.

To be clear, education company valuations are still healthy. The median education M&A transaction in the sectors we follow, was 11.8x EBITDA and 1.6x revenue in 2016, down from 15x and 3.0x respectively in 2014. Double digit EBITDA multiples are nothing to sneeze at, despite the decrease. Certainly a few larger tech deals help drive the numbers higher, and not every business should expect the same multiple. As we always caution our readers, many variables factor in. These include but are not limited to print vs. digital business models, recurring revenue, size, management team experience, and broader market sentiment.

The current market environment remains positive if you are considering an exit or liquidity. While we don't know what the future will bring, and the public stock markets have recently shown a renewed optimism albeit with increased volatility, we do know that demand for good businesses remains strong, buyers have cash to spend, and the availability of bank financing is stable

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 us at 952-893-9012.
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.

Postsecondary Education
Training  and Development
Education Products and Services Providers
EV*/Revenue = 1.2x
EV*/Revenue = 0.7x
EV*/Revenue = 1.1x
EV*/Revenue = 1.4x
EV/EBITDA = 12.4x
EV/EBITDA = 5.5x
EV/EBITDA = 11.7x
EV/EBITDA = 10.9x
3-Yr Rev Gr = 10.7%
3-Yr Rev Gr = -5.0%
3-Yr Rev Gr = 6.0%
3-Yr Rev Gr = 0.0%
EBIT Margin = 8.5%
EBIT Margin = 5.1%
EBIT Margin = 8.0%
EBIT Margin = 4.7%

* EV= Enterprise Value

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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.