Cherry Tree & Associates | June 2018 | Volume XII, Issue 12
 Microsoft Acquires Flipgrid

Microsoft Corporation (NASDAQ:MSFT) has acquired Flipgrid, an engaging video-based social learning platform used in 180 countries by more than 20 million pre-kindergarten to Ph.D.-level educators, students and families. In joining Microsoft, Flipgrid will retain its distinct brand, culture, and team that is focused on amplifying the voices of all students.

Cherry Tree & Associates served as exclusive investment banking advisor to Flipgrid in the transaction
Bain Capital Acquires Varsity Brands…

Bain Capital has acquired Varsity Brands, a maker of cheerleading uniforms and school spirit merchandise, from Charlesbank Capital Partners and other investors. Sources indicate that the company was valued at approximately $2.5 billion.

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…And Separately Acquires Little Learning School

Bain Capital, through its existing investment in Only About Children, has acquired Australia-based Little Learning School, an operator of 20 childcare centers. Sources indicate that the deal is valued at approximately $115 million .
Trilogy Education Raises $50 Million

Trilogy Education, a provider of bootcamp courses in partnership with universities, has raised $50 million in a round of funding led by Highland Capital Partners, Macquarie Capital, and Exceed Capital. Trilogy currently works with 35 universities.

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Civitas Learning Acquires ClearScholar

Civitas Learning, a provider of predictive analytics for higher education institutions, has acquired ClearScholar, the developer of a student engagement app for higher education. Terms of the deal were not disclosed .
Degreed Acquires Pathgather

Degreed, a lifelong learning platform, has acquired Pathgather, a provider of a learning experience platform used by enterprises to prove insights that align employee growth with business goals. Terms of the deal were not disclosed.

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Vista Higher Learning Acquires SANTILLANA USA

Vista Higher Learning, a publisher of world language products, has acquired SANTILLANA USA, a provider of educational content and services for learning Spanish in the U.S. Terms of the deal were not disclosed.

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TinyTap Raises $5 Million

TinyTap, an educational game creation platform, has raised $5 million in a round of funding led by Aleph venture capital fund, with participation from Inimiti, Radiant and ReInvent. The company’s marketplace contains more than 150,000 learning games in 24 languages .
Real Time Cases Raises $3.5 Million

Real Time Cases, a provider of video-based case study activities for undergraduate and graduate-level courses, has raised $3.5 million in a round of funding from SWaN Ed. The company’s current curriculum includes topics such as marketing, organizational behavior, finance, and hospitality.
Showpad Acquires LearnCore

Showpad, a provider of sales enablement solutions, has acquired LearnCore, a provider of sales training and coaching software. The combined company is reportedly on track to grow revenue 100% in 2018. Terms of the deal were not disclosed.

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ECS Learning Systems Acquires Prepworks

ECS Learning Systems, a provider of test prep materials and software, has acquired Prepworks, a provider of adaptive test preparation services. Terms of the deal were not disclosed.
VIPKID Raises $500 Million

VIPKID, a provider of real-time, one-on-one English immersion teaching, has raised $500 million in a Series D round of funding led by Coatue Management, Tencent, Sequoia Capital and Yunfeng Capital. The platform is used by more than 40,000 North American teachers and 300,000 students in China and other countries .
2U Raises $331 Million…

2U (NASDAQ:TWOU), a provider of technology, services, and data architecture for campus-based universities to create digital learning programs, has raised $331 million in its latest public offering.

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…and Agrees to Acquire CritiqueIt

2U (NASDAQ:TWOU) has agreed to acquire CritiqueIt, a provider of digital annotation software designed to promote more engagement among students and faculty. CritiqueIt is reportedly used currently by most 2U-powered degree programs. Terms of the deal were not disclosed .
Pacon is Acquired by F.I.L.A.

Pacon, a provider of branded arts, crafts, and specialty paper products for the school, retail, and online markets, has been acquired by Fabbrica Italiana Lapis ed Affini S.p.A. (F.I.L.A.), a provider of art materials and related products, for $340 million.
Beamery Raises $28 Million

London-based Beamery, a provider of candidate relationship management and recruitment marketing software, has raised $28 million in a Series B round of funding led by EQT Ventures, with participation from M12, Index Ventures, Edenred Capital Partners and Angelpad Fund. The company reportedly has 100 customers, including Facebook, VMware, and Balfour Beatty .
Frontline Education Acquires Prologic Technology Systems

Frontline Education, a provider of school administrative software for K-12 education, has acquired Prologic Technology Systems, a provider of business and student information systems. Prologic serves more than 730,000 K-12 students primarily in Texas. Terms of the deal were not disclosed.
Scantron Acquires Castle Worldwide

Scantron, a provider of assessment and technology solutions, has acquired Castle Worldwide, a provider of licensure and certification testing solutions. Terms of the deal were not disclosed.
Sphero Raises $12 Million

Sphero, a developer of toy robotics, has raised $12 million in a round of funding from new and existing investors. The latest round of funding will reportedly be used to position the company as education-first.

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Gradescope Raises $2.75 Million

Gradescope, a provider of an automated grading platform, has raised $2.75 million in a round of funding led by Reach Capital, with participation from GSV AcceleraTE, Ironfire Ventures, K9 Ventures, Freestyle Capital, and Bloomberg Beta.

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Novel Effect Raises $3 Million

Novel Effect, a provider of a voice-enabled storytelling platform, has raised $3 million in a Series A round of funding led by Alpha Edison, TenOneTen, and Waverley Capital, with participation from Maveron, Lux Capital, McCune Capital, and Amazon’s Alexa Fund.
Kanopy Receives Investment from L Squared Capital Partners

Kanopy, a streaming video platform for professors, students, and public library patrons, has received a growth investment from private equity firm L Squared Capital Partners. The company has more than 1,300 university and library partnerships in the U.S. alone.
Lincoln Learning Solutions Acquires Evan-Moor Corporation

Lincoln Learning Solutions, a nonprofit online learning and support service organization, has acquired Evan-Moor Corporation, a provider of pre-K-8 supplemental education materials. Terms of the deal were not disclosed.
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
People often ask me which edtech conferences to attend, and ISTE (the International Society of Technology in Education) is always in my top 5. Having just returned from this year’s show with 24,000 of my closest friends, if someone asked me to sum up the state of the education technology market in one word, I might attempt a Ron Burgundy impersonation, and say, “…electric.” 

Granted I hadn’t been able to make the last couple of years (as many of you know, my clients mostly control my schedule), so I can’t speak to what is new this year, but I can speak to what was noticeable. First: robotics, robotics, and more robotics. Having done deals in the STEM space I know there is strong demand for robotics offerings, and the offerings are cool, but can the market support that many vendors. Second, Microsoft made a huge splash. And not just with the Flipgrid announcement, although that helped (and judging from the show floor and Twitter, #flipgridfever infected half the attendees). They are clearly re-energized and educators have taken notice. (And as shouldn't be surprising, Google had a strong showing and a lot of booth energy as well.) Third were the firms that were noticeably absent. Where was Apple? They used to own this market, and the last I heard it is still an important segment for them. But not only did they concede the largest front and center booth locations to Microsoft and Google, I didn't see a booth for them at all.

The best part of ISTE is the people. I came back from the show energized and smarter from the people I met and spoke with at the show. One of the many interesting conversations I had was with a CEO who noted that gone are the days where you have to have grown up in this market, to be successful in this market. Tech giants and PE firms, and the people they hire, are proving it every day. We continue to see an increasing number of $50mm+ and $100mm+ education companies, growing and prospering, by implementing smart business strategies: creating and marketing compelling solutions, blocking and tackling with efficient operations and taking care of customers, and remembering, “no margin, no mission.” 
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

Prepared by:
Chad Johnson, Managing Director and Partner | 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.