May 2017
Volume XI, Issue 11
2U Agrees to Acquire GetSmarter for $103 Million  
The South African division of 2U (NASDAQ:TWOU), a provider of SaaS digital education solutions for postsecondary institutions, has agreed to acquire GetSmarter for approximately $103 million (7.2x EV/Rev.). With offices in Cape Town and London, GetSmarter collaborates with universities to offer premium online short courses to working professionals. The company offers more than 70 short courses and has more than 50,000 alumni
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Nelson Education Agrees to Acquire McGraw-Hill Ryerson's K-12 Business
Nelson Education, a Canadian traditional education publisher, has agreed to acquire McGraw-Hill Ryerson's K-12 Business. McGraw-Hill Ryerson is the Canadian subsidiary of McGraw-Hill Education. McGraw-Hill Ryerson publishes and distributes print and digital educational materials in the subjects of Mathematics and Science, English, Fine Arts, Music, Social Sciences, and Technology. Terms of the deal were not disclosed
Education Growth Partners Acquires Apex Learning  
Education Growth Partners, a Boston-based private equity firm, has acquired Apex Learning. The company is a provider of digital curriculum solutions aimed at increasing graduation rates, lowering dropout rates, and improving student achievement. There were more than three million enrollments in Apex Learning's digital curriculum solutions during the most recent school year. Terms of the deal were not disclosed
Grammarly Raises $110 Million
Grammarly, developer of an online proofreading app designed to catch grammatical and spelling errors, has raised $110 million in a round of funding led by General Catalyst Partners and with participation from Institutional Venture Partners, Breyer Capital, Signalfire, and Spark Capital Partners. Grammarly's app is available to all internet users at no charge. Users can pay a premium to unlock additional tools. The company says it has approximately 6.9 million daily active users with most of them only utilizing its free tools
Busy Bees Holdings Agrees to Acquire BrightPath Early Learning
Busy Bees Holdings, a British operator of pre-school nurseries, has agreed to acquire BrightPath Early Learning (TSXV:BPE) for CAD 0.80 per share (2.1x EV/Rev., 21.9x EV/EBITDA). BrightPath Early Learning provides child care and early education services in Canada. The transaction is valued at CAD 145 million and represents a 46% premium over the 30-day volume weighted average price
Graduation Alliance Acquires AdvancePath Academics
Graduation Alliance, a provider of dropout prevention, dropout recovery, and career preparation programs, has acquired AdvancePath Academics, an operator of in-school academies for over-age and credit deficient high school students. The combined company has worked with more than 600 public schools, districts, and community colleges, and has served over 400,000 students. Terms of the deal were not disclosed
Epiphany Learning Acquires My Learning Collaborative Solution
Epiphany Learning, provider of a learning relationship management system for K-12 districts and schools, has acquired My Learning Collaborative Solution. My Learning Collaborative operates an online workflow platform customized to a district's pedagogy to support personalized, interdisciplinary, and competency-based learning. Terms of the deal were not disclosed
AltSchool Raises $40 Million
AltSchool, a developer of educational software solutions and an operator of tech-enhanced, personalized learning micro-schools, has raised $40 million in a round of funding from undisclosed investors. The company has previously raised more than $130 million from venture capital firms, such as Andreessen Horowitz and Founders Fund, as well as individual investors, such as Mark Zuckerberg.  This current round of funding is intended to raise a total of $80 million
CreativeLive Raises $25 Million
CreativeLive has raised $25 million in a round of funding led by GSV Acceleration and with participation from Reed Elsevier Ventures, Greylock Partners, and others. CreativeLive operates an online platform where creative and entrepreneurial classes are taught by experts and industry leaders. The company claims to have 10 million students
Sylvan Learning Acquires Citelighter
Slyvan Learning, a provider of in-center and online tutoring services for K-12 students, has acquired Citelighter, a developer of a digital writing solution for classrooms. The solution helps students break down writing tasks, while giving teachers and administrators the power to create assignments, real-time assessments, and standards based grading. The acquisition completes Sylvan Learning's new national writing program, which will launch this fall. Terms of the deal were not disclosed
Byju Approaches Acquisition of Edurite Technologies' Online Business
Byju, an Indian Ed-tech company and creator of India's largest K-12 learning app, is reportedly in late stage discussions to acquire the online business of Edurite Technologies, a subsidiary of TutorVista. TutorVista is an online tutoring company owned by Pearson (LSE:PSON). Terms of the deal have not been disclosed
TCC Software Solutions Acquires Vertex Solutions Group
TCC Software Solutions, an IT consulting services provider, has acquired Vertex Solutions Group, a provider of performance assessment learning and development services. Vertex Solutions Group has worked with more than 1,000 companies across a wide array of industries as well as over 65 federal agencies. Terms of the deal were not disclosed
Gauge Capital Invests in eDynamic Learning 
Gauge Capital, a Texas-based private equity firm, has invested an undisclosed sum for a minority stake in eDynamic Learning, a publisher of online high school career and elective courses. eDynamic Learning offers more than 70 courses grouped into 16 career clusters. The company hopes the new partnership will lead to expanded product offerings, increased market share, and accelerated growth Acquires Rafter, an online retailer of textbooks and digital materials, has acquired the digital assets of Rafter, a provider of cloud-based course materials management solutions. Existing Rafter customers will be transitioned to's ALL Access Program, which simplifies the textbook purchasing process and provides course materials at a significantly reduced cost. Terms of the deal were not disclosed
Revolution Prep Raises $4 Million 
Revolution Prep, a provider of online education and tutoring services, has raised $4.0 million in a round of funding led by Kennet Partners. The company plans to use the proceeds on one of its newest programs, Revolution Math, which is a weekly online interactive math class for students in grades 2-5. The program experienced a 97% retention rate for monthly users in its one year beta trial
Centriq Group Acquires Premier Knowledge Solutions 
Centriq Group, a Kansas City-based provider of IT training services, has acquired Premier Knowledge Solutions, a St. Louis-based provider of onsite and online computer training classes. The acquisition will help Centriq Group expand its services beyond the commercial sector and into the government and military sector where Premier Knowledge Solutions has historically had a strong presence. Terms of the deal were not disclosed
Yup Technologies Acquires Quickhelp 
Yup Technologies, developer of an on-demand tutoring application for math and science, has acquired Quickhelp, an online tutoring platform. Quickhelp originally started as a Harvard Innovation Lab venture where it connected undergraduate and graduate students with tutors. The acquisition will help Yup Technologies expand into the college tutoring marketplace as it currently targets middle and high school students
CEAdvisory Raises $2.3 Million 
CEAdvisory, a developer of an online continuing education platform for accountants, attorneys, and medical professionals, has raised $2.3 million in a round of funding from undisclosed investors. CEAdvisory plans to expand into other professions in the near future. The company had previously raised $1.2 million in funding from undisclosed investors in April 2016
Paragon One Raises $1.9 Million 
Paragon One has raised $1.9 million in seed funding from Foundation Capital, Y Combinator, Learn Capital, University Ventures, and others. Paragon One provides coaching and mentoring services to students that are seeking to land competitive jobs and internships in the U.S. The company often requires a three-month subscription that costs about $2,000 to $3,000
MC Monthly Commentary:

We attended the ASU/GSV conference in Utah this past month, and had substantive discussions with many of you. And there was a lot to discuss, from the new Education Secretary's speech, to Pearson's announcement that it would be exploring options for its K-12 business, to the Kaplan/Purdue transaction discussed in this newsletter last month. It got us thinking about how much the universe has changed since this newsletter started nearly ten years ago.

The biggest change in M&A in education over that time has to do with who the buyers are. There was a time when the goal of every entrepreneur was to sell their business to Pearson. And there was a time when if a business was able to sell, Pearson was the most likely buyer. But today, private equity firms provide the bulk of the capital for acquisitions in this space. Many firms have acquired platforms to add to, have educated themselves on the unique market dynamics, and have spent time competing with each other for deals.

The good news for sellers, is that private equity firms can (and recently have) beat strategics in bidding for strong companies. PE firms have to put their capital to work, there are new firms raising funds every week, and lenders are still fairly accommodating to help finance deals. We have experienced many transactions in the past two-three years where we assumed a strategic would win the bidding, only to be beaten out by an aggressive, creative equity firm.

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 = 1.6x
EV*/Revenue = 1.0x
EV*/Revenue = 1.2x
EV*/Revenue = 1.5x
EV/EBITDA = 11.1x
EV/EBITDA = 8.0x
EV/EBITDA = 9.6x
EV/EBITDA = 12.1x
3-Yr Rev Gr = 1.0%
3-Yr Rev Gr = -2.8%
3-Yr Rev Gr = 5.1%
3-Yr Rev Gr = 0.6%
EBIT Margin = 12.9%
EBIT Margin = 6.9%
EBIT Margin = 4.5%
EBIT Margin = 4.2%

* 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.