2U, Blackboard OpenLMS, and the Continuing Wave of EdTech Buyout Activity

Author

Phil Hill
March 10, 2020

In my December 2019 post on a possible Ellucian acquisition, I noted:

Consider Ellucian to be the latest company that either has been sold or is up for sale in a consolidating EdTech market. There is a broad trend at play here, and it is quite different from the venture capital wave of earlier years, where most investment was driven by growth potential. EdTech is in a new era.

Instructure continues its soap opera of a Private Equity buyout attempt (with updates expected at the end of next week). SmartSparrow sold its assets to Pearson in January for $25 million. McGraw-Hill Education and Cengage continue their soap opera of a merger. Campus Management and EdCentric were acquired by Veritas Capital in January. And with today’s news comes two additional stories.

Image by Top 10 website

Blackboard Agrees to Sell OpenLMS

Blackboard announced today that it has sold its OpenLMS (the LMS formerly known as Moodlerooms) assets to London-based Learning Technologies Group (LTG), a publicly-traded conglomerate whose holdings include Rustici Software, best known for their work on xAPI standards and SCORM Cloud. Blackboard CEO Bill Ballhaus positioned the sale as increasing Blackboard’s focus.

This strategic transaction enables us to accelerate our efforts to drive the next wave of EdTech innovation via our platform with Learn Ultra at its core and sets the stage for us to deliver a dynamic and personalized experience, fueled by data, to advance learning. [snip]

Our most complex days are behind us. We are now more focused than ever on driving innovation in our key business areas of teaching and learning, K-12 community engagement, and student success.

Phill Miller, whose professional lineage includes ANGEL Learning and Moodlerooms, will depart Blackboard and lead the new LTG OpenLMS group. His blog post stressed heavily on the past and future impact on the Moodle Community.

LTG is making a big bet on the future of Moodle and has every reason to invest in the ongoing sustainability of the platform and of the Moodle community.

The sale price was $31 million, which is worth exploring further as I believe this number is close to what Moodlerooms revenue was at the time of the Moodle / Blackboard partnership termination. That is not much of a premium (growing SaaS companies most often sell for 5 times or more of annual revenue), indicating that there’s more to the story. The purchase was described by LTG for “all intellectual property and assets relating to Blackboard’s Open LMS platform”.

Update 3/11 – Based on interview with Blackboard and LTG representatives, this information was incorrect. OpenLMS did not have roughly $30 million in revenue in 2018 or today, it was lower. I will describe further in a follow-up post. I apologize for this mistake.

It is also worth noting that LTG focuses on corporate learning.

Learning Technologies Group plc (LTG) is a market-leader in the fast-growing workplace digital learning and talent management market. LTG offers large organisations a new approach to learning and talent in a business world driven by digital transformation.

Moodle HQ was quick to share thoughts on the deal.

I’ll likely cover this deal in more detail when I have time for interviews and research, as I think this move could have a significant impact on the LMS market outside of North America. One question to explore is whether the acquisition is planned to serve both corporate and academic LMS markets.

2U Advances Talks To Go Private

Also in today’s news, according to Dealreporter:

Higher education technology company 2U [NASDAQ:TWOU] is in the second round of a sale process, said five sources familiar with the situation, though some cautioned that there are hurdles to reaching a deal.

Sachem Head, an activist investor that helped push Instructure begin the process to be acquired, has also been pushing 2U to find a private equity buyer to take the company private. Sachem Head held more than 2% of company shares as of the end of the year 1, and Dealreporter describes 2U as entering a second round of discussions with a small number of private equity firms.

Their reporting goes out of its way to point out that this move has significant barriers, including 2U’s high price. We’ll follow this story, but note that there are a lot of unknowns here.

Common Trend

Don’t treat the following as a full analysis of the overall trends, but a common trend in these buyouts (whether completed or not) is that there is a real shift in EdTech financing. Gone are the days when Venture Capital investments in startups drove investments, with the new trend driven by mergers and acquisition (M&A) activity. To a large degree, this is a trend of EdTech hype shifting into corporate reality. A shift from the primacy of an exciting story to a need for profitability and sustainability.

Disclosure: 2U and Blackboard are subscribers to the MindWires LMS Market Analysis data service (as are many of their competitors), and we have a number of investment firms who are also subscribers to the service and pay for in-depth market data and research.

1 Dealreporter describes Sachem Head as owning more than 4% of 2U shares, but I do not see this in the SEC filings.