Cherry Tree & Associates | May 2020 | Volume XIV, Issue 11
McGraw-Hill and Cengage Terminate Proposed Merger

McGraw-Hill and Cengage announced they have mutually agreed to terminate the proposed merger announced in May 2019. In a statement, Simon Allen, CEO of McGraw-Hill said: "Because the required divestitures would have made the merger uneconomical, McGraw-Hill and Cengage have decided to terminate the merger agreement. This will allow each of us to focus on our respective stand-alone strategies for the benefit of our owners, employees, customers and other stakeholders. I want to express my deep appreciation for the efforts and incredible commitment demonstrated by McGraw-Hill's employees over the past year and particularly in recent weeks as they have worked tirelessly to help educators make the transition to online learning."
PresenceLearning Raises $27 Million

PresenceLearning, a special education teletherapy provider, raised $27 million in a Series D round. Bain Capital Double Impact led the round while existing factors Catalyst Investors, New Markets Venture Partners and Catamount Ventures. PresenceLearning has reportedly facilitated more than 2.5 million teletherapy sessions since 2009 and has raised $71.5 million to date.
Guild Education Acquires Entangled Group

In an all-stock transaction, Entangled Group, a venture studio advising and investing in education startups, was acquired by Guild Education in a transaction valued at $150 million. Entangled Group’s operating assets, consulting business and venture studio work are part of the transaction but Entangled Group’s portfolio investments and ownership stakes in other companies are not part of the deal. Guild Education is a female-led education technology company valued at over $1 billion that connect higher-ed programs with companies that want to upskill its employees or assist them in earning degrees.
MasterClass Raises $100 Million

MasterClass, the startup offering live and pre-recorded lessons from celebrity experts, has raised $100 million in a Series E round led by Fidelity. Founded in 2015, MasterClass has raised $240 million in venture capital and is reportedly valued at $800 million. This latest capital infusion “puts us on the IPO path,” says co-founder and CEO David Rogier.
UWorld Acquired RxPrep

UWorld, a provider of high-stakes online learning tools, acquired RxPrep, an online review course for pharmacy students preparing for the NAPLEX exam. RxPrep is well-known among pharmacy students and adds to UWorld’s test prep portfolio which is reportedly used by over 2 million students.
eLearning Brothers Raises $38 Million and Completes 2 Acquisitions

eLearning Brothers, a provider of corporate learning technology, raised $38 million from RLG Capital and Trinity Private Equity Group to simultaneously acquire Trivantis and Edulence. The transaction combines eLearning Brothers’ courses and content with technology products from Trivantis and Edulence to create a robust corporate learning platform.
GO1 Raises $40 Million, an online learning platform focused on professional training courses, raised $40 million in a Series C round. The Australia-based company now has operations in San Francisco and will use the funds to expand growth in North America. The round was led by Madrona Venture Group and SEEK and saw participation from Microsoft’s venture arm, Salesforce Ventures and Our Innovation Fund. GO1 has a partnership with Microsoft Teams which is integrated into its platform.
Athletic Supply Acquires Universal Athletic

Universal Athletic, a large independent distributor of sporting goods, was acquired by Athletic Supply, a portfolio company of Trivest. Universal Athletics provides its services primarily to high schools and colleges across the Western US.
Primer Raises $3.7 Million

Primer, a developer of online tools to support homeschooling parents and children, raised $3.7 million in a seed round led by Keith Rabois, a partner at Founders Fund. Primer proved a library of curated online materials and resources for parents to ensure compliance with homeschooling standards.
IntelliBoard Raises $3.4 Million

IntelliBoard, a reporting and analytics platform for learning management systems like BlackBoard and Canvas, raised $3.4 million in a Series A round. Connecticut Innovations, Flashpoint VC, Smarthub VC and LETA capital participated in the round.
EdSights Raises $1.6 Million

EdSights, a developer of a chatbot used by universities to engage students, raised $1.6 million in a seed round with participation from Lakehouse Ventures, Kairos and The Fund. Founded in 2017, EdSights licenses its product to colleges and institutions for $15 to $25 per student.
BV Investment Partners Invests in StraighterLin e

StraighterLine, an edtech company providing solutions to deliver affordable and effective learning pathways to formal degree programs and industry credentials, received a significant investment from BV Investment Partners. StraighterLine reportedly supports over 35,000 new students each year directly through the website as well as its growing network of institutional relationships.
Top Hat Acquires Textbook Assets from Nelson

Top Hat, which offers a “clicker” like classroom response tool for student, is expanding its product offering with the purchase of 400 higher education textbook titles from Nelson. The purchase represents Nelsons entire Canadian higher-education textbook business. The deal is reportedly valued at under $30 million. Top Hat plans to digitize nearly all the textbook content so they are compatible with its polls and quizzes.
ApplyBoard Raises $75 Million at $1.5 Billion Valuation

ApplyBoard, the edtech company helping international students search and apply to institutions across the globe getting a cut from universities for the referrals, raised $75 Million in a recent round. Based in Ontario, the 5-year-old Company was valued at $1.5 Billion in the round led by Drive Capital. ApplyBoard reportedly partners with over 1,200 institutions and has served over 100,000 students.
Quizlet Raises $30 Million at $1.0 Billion Valuation

Quizlet, the virtual flashcard and study guide platform crowdsourcing content from students, raised $30 million in a Series C round led by General Atlantic. The round values the Company at $1.0 billion, more than five time its valuation during its latest funding round in 2018. Quizlet has raised more than $60 million to date and features a massive user-base of more than 50 million monthly users, including two-thirds of all high-schoolers in the US.
ACT Acquired ScootPad

ScootPad, a developer of online curricula for K-8 math and English, was acquired by ACT, the nonprofit best known for its college admissions test. ScootPad reportedly uses adaptive technology to detect gaps in students’ knowledge and provides the appropriate resources to help master those concepts.
Triangle Digital Ventures Acquires Covideo

Covideo, a leader in video messaging that is reportedly used by thousands of businesses worldwide, was acquired by Triangle Digital Ventures. Triangle Digital Ventures is a private equity sponsor that acquires software and digital media businesses. Prior to the acquisition, Covideo was owned by APCO.
Bright Scholar Education to Make Control Investment in Linstitute

China-based Bright Scholar Education Holdings (NYSE: BEDU), the global education service company, agreed to acquire 51% of Linstitute, an online training service offering various international courses. Linstitute offers a comprehensive selection of academic courses covering Mathematics, Physics, Chemistry, Biology, Computing Science and Modeling as well as other services such as summer school application and overseas study counselling.
Niche Raises $35 Million

Niche, a school search platform connecting students to a fitting K-12 school or college, raised $35 million in a Series C round. The round was led by Radian Capital with participation from Salesforce Ventures. Niche claims to have over 1,400 school clients and is establishing itself as a prominent recruiting tool for educational institutions.
Enuma Raises $9 Million

Enuma, the education company best knows for its children’s app Todo Math, raised $9 million in a Series B round led by YellowDog with participation from SKS, Kakao Ventures, HEAD Foundation and other Asia-based investors. Enuma has now raised over $18 million.
AllHere Raises $3.5 Million

AllHere, a tool helping to manage attendance and absenteeism for remote teaching in K-12 settings, raised $3.5 million in a seed round led by Rethink Education. This is AllHere’s second round and its raised $4.1 million to date.
FrontRow Raises $3 Million

FrontRow, an online learning platform for creative arts, hobbies and sports, raised $3 million in a round led by Lightspeed and SAIF Partners. This is the Company’s first institutional capital raise.
Spekit Announces Investment

Spekit, an in-app learning that helps employees learn while they work by accessing enablement and resources in real time, announced an investment from Operator Collective. Leyla Seka, a former Salesforce executive, led Operative Collective’s investment and will join as a board observer.
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
While jobless claims continue to rise, and economic activity remains significantly contracted, the stock market has been surprisingly resilient. More notably for education-related businesses, capital markets activity is especially strong in online learning as envisioned in the chart below.

Perusing the headlines this month, readers might understandably have expected to see few announcements. We’ll assume our readers understand that online learning has seen a surge of interest and activity, in all education segments. But the number of capital raises is still noteworthy, given that many sectors are seeing decreased investment activity due to the uncertainty caused by the pandemic. Two of the announcements above were for businesses that achieved “Unicorn” status (ApplyBoard and Quizlet), and one came within striking distance (Masterclass). Remote instructional solutions such as PresenceLearning are also benefitting from the need to close schools, and we imagine are seeing an expanded market opportunity.
M&A activity was less robust reduced, which is more expected. There continues to be interest and activity, and our discussions with buyers and investors confirms this, especially with businesses in some way involved in online learning and digital resources. In the majority of cases this activity is driven by private equity firms that have money to invest, and sometimes platform companies for which they seek add-on acquisitions. We can’t blame buyers for also hoping that the market uncertainty will present a buying opportunity, but it remains to be seen to what extent that will occur. Our expectation is that the gap between the haves (growing, subscription based businesses) and have-nots (flat or declining businesses with more traditional business models) will widen.

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 Partner | 952.253.6010

Follow me on Twitter @ChadEricJohnson

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.