Cherry Tree & Associates | May 2018 | Volume XII, Issue 11
Summit Partners Acquires Teaching Strategies

Summit Partners, a Boston-based private equity firm, acquired Teaching Strategies, an online platform that provides childhood education resources including pre-school assessments and curriculum, from L Squared Capital Partners.

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Blackbaud Acquires Reeher

Blackbaud, a cloud software company serving non-profits, has acquired Reeher, a higher education fundraising platform based in St. Paul, Minnesota, for $43 million.

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Renovus Capital Acquires Great Lakes Institute of Technology

Renovus Capital Partners, an education focused private equity firm, acquired Great Lakes Institute of Technology, a provider of healthcare-focused post-secondary education. Terms were not disclosed.

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  WeWork Acquires MissionU

WeWork, a provider of shared workspaces, has continued its foray into non-degree education businesses by acquiring MissionU, a one-year educational program focused on career preparation. Previous investors included Learn Capital, FirstMark, University Ventures, and Rethink Education. Terms were not disclosed.
Battery Ventures Invests in Learnosity

Learnosity, a provider of online assessment and testing software for the K-12, Higher Education, and Corporate Learning markets, has received a $18.9 million investment from Battery Ventures, a technology-focused investment firm.
Techtonic Group Raises $2 million

Techtonic Group, a software development company, raised $2 million. The Series A round included University Ventures and Zoma Capital. The money will be used to fund an apprenticeship program with the intent of diversifying tech talent.

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Learning Machine Technologies Raises $3 Million

Learning Machine Technologies, a blockchain-based platform used by the higher education industry to secure records, raised $3 million. The seed round was led by PTB Ventures.
Activate Learning Buys Conceptua Math

Activate Learning, a provider of K-14 STEM curriculum, acquired Conceptua Math, a developer of math curriculum. Terms were not disclosed.

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Halifax Partners Acquires ChanceLight

Halifax Partners has acquired ChanceLight from Trimaran Partners. ChanceLight is a provider of behavioral health, therapy and education solutions for young adults and children. ChanceLight was formerly Education Services of America, and includes businesses such as Ombudsman. Terms were not disclosed.
Campus Labs Acquires Chalk & Wire

Campus Labs, a higher education data analytics platform that is a subsidiary of Leeds Equity Partners, completed its acquisition of Chalk & Wire, a provider of learning assessment and credentialing solutions. Terms were not disclosed.
Frontline Education Signs Definitive Agreement to Acquire Prologic

Frontline Education, a provider of K-12 school administrative software, signed a definitive agreement to acquire Prologic, a provider of software solutions for school districts. Terms were not disclosed.
Fuse Universal Raises $20 Million

Fuse Universal, a London-based provider of learning technologies to workplaces, raised $20 million. The Series B round was led by Eight Roads Ventures. The company has now raised $30 million.

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Lumni Acquires Base Capital and Paytronage

Lumni, a provider of financing solutions for students, acquired Base Capital and Paytronage, both providers of income share agreements (ISAs). Terms of the transactions were not disclosed.

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Sterling Invests in Academic Programs International

Academic Programs International (API), a provider of study abroad programs, received an investment from Sterling Partners’ Education Opportunity Fund, an education focused private equity fund. Terms were not disclosed.
ClassWallet Raises $2.3 Million

ClassWallet, a provider of payment solutions to schools, raised $2.3 million in a seed round. The round was led by Rainfall Capital and Florida Funders. To date, the company has raised $6.3 million.

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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
Is it a sellers market, or a buyers market? Valuations suggest the former, but it is a great time to be either. A combination of increased enthusiasm for investing among corporations due to an improved economy and a lower tax rate, and a ready supply of capital especially from private equity firms, are continuing to provide potential sellers with a variety of options for raising capital or exiting a business. And with more companies carving out business units, baby boomer owners looking to retire, and a steady supply of private equity firms exiting their portfolio companies, there is a ready supply of attractive businesses.
Valuations are strong among both private and public companies. Cherry Tree research shows that median valuations among public education technology companies currently stands at nearly 4x revenues, after ranging between 3.2x and 3.8x in 2017, and up from 2.0x to 2.3x in 2015. As we have described in past newsletters, valuations continue to be most strongly correlated with revenue growth rates, and gross margins. Net margins matter less, as rational investors expect a rapidly growing company to invest in effective sales and marketing, product development, and necessary support, if the market opportunity (and market acceptance) warrant it.

Our precedent transaction analysis for private edtech companies is similar, with median valuation ranges at 3x revenues and 12x EBITDA, and a range for companies in the 25 th  and 75 th  percentiles of 2.4x to 5x revenues. And as we have also mentioned in previous newsletters; past performance doesn’t guarantee future performance, there are a variety of factors that impact a specific business’ valuation, and the value of your business may vary from industry averages.
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 | 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.