K-12 Technology-Enabled Services and Content Providers Remain Targets as M&A Activity Remains Strong
Capstone Partners released its May 2022 K-12 Education Market Update, reporting that pandemic-induced e-learning tailwinds have continued to impact the sector, with digitally-enabled participants experiencing heightened revenues and acquisition opportunities. The learn-from-home environment has posed a lingering, unprecedented threat to student development, as many U.S. K-12 students fell behind in math and reading curriculums at the end of the 2021 school year. The mounting pressure to enhance learning outcomes and counter high student-to-teacher ratios has prompted education material, instruction guides, and homework assignments to be delivered in a digital format. As a result, global K-12 digital infrastructure and content spend reached record highs in 2021, with the U.S. at the forefront of technology adoption. Heading into the 2022-2023 school year, U.S. school districts will look to utilize the billions of unspent federal funding received in 2021 to offset learning loss among K-12 students.
K-12 Education sector merger and acquisition (M&A) activity has remained strong through year-to-date (YTD), with substantial interest from strategic and private equity buyers. Well-capitalized strategic buyers continue to play a consolidator role in the sector, acquiring K-12 technology-enabled services and content providers seeking to address learning material hurdles caused by COVID-19. Financial buyers’ investment themes continued to include school footprint expansion and digital learning tool enhancement to improve student engagement and counter high student-to-teacher ratios for portfolio companies. In addition, the annual turnover of students in K-12 schools has provided sector participants with a fair degree of reoccurring revenue visibility, attracting significant buyer interest. K-12 Education sector M&A transaction multiples have averaged a favorable 3.0x EV/Revenue and 10.7x EV/EBITDA over the past three years, on pace with the broader middle market Education & Training industry average and overall middle market average, according to Capstone’s Middle Market M&A Valuations Index. Top tier valuations have been afforded to digital publishers exhibiting a strong foothold in the K-12 market and franchised student learning centers with national coverage.
Also included in this report:
- How public companies in the space have performed in the last twelve-months compared to historical norms.
- A breakdown of average M&A purchase multiples in the middle market, Education & Training industry, and K-12 Education sector.
- Analysis of recent, notable M&A transactions completed in the K-12 Education sector.
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