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Insights from Thoma Bravo and Frontline Education for Instructure’s Possible Future

While the Thoma Bravo acquisition of Instructure 1 is not a done deal, it would be useful to look at the relevant history of Thoma Bravo to get insight on likely behavior should the deal go through. Academics might not have a deep interest in public markets and private equity buyout firms, but they do tend to care about whether their favorite system will offer reduced services based on layoffs, whether prices will increase, and whether there will be additional EdTech buyouts affecting choices in the market. tl;dr – history probably answers the first and third questions much better than the second.

Profile of Bravo

Just two months ago Forbes ran a profile of Orlando Bravo, the leader of private equity firm (PE) Thoma Bravo, which provided some useful insight into the nature of this company’s buyout activity. First of all, Bravo is a successful and growing company.

In February, the French business school HEC Paris, in conjunction with Dow Jones, named Thoma Bravo the best-performing buyout investor in the world after studying 898 funds raised between 2005 and 2014. According to public data analyzed by Forbes, its funds returned 30% net annually, far better than famous buyout firms like KKR, Blackstone and Apollo Global Management.

Thoma Bravo has a broad portfolio in different markets, but the firm only deals with enterprise software companies, as described in Forbes.

But the failure [of losing almost $100 million invested as the dot-com bubble popped] led to an epiphany that soon made Bravo and his partners billions. He realized his mistake was in backing startup entrepreneurs, an inherently risky move, when for the same money he could buy established companies selling niche software to loyal customers.

Frontline Education as Case Study

Logos showing Thoma Bravo has bought Frontline Education, from 2017.

The closest comparison to Instructure in Thoma Bravo’s portfolio is Frontline Education, which has long provided K-12 HR school administration software. Frontline was founded in 1998, and their core product, originally known as Aesop, handles absence management and substitution replacement for teachers.

Frontline’s Aesop, now called Absence Management, is hugely popular in the US K-12 market, with more than 4,000 of the 14,000 school districts as users as of 2014. EdSurge described the company’s growth and subsequent acquisition by Thoma Bravo in a 2017 article.

After private equity group Insight Venture Partners acquired a controlling stake in 2014, Frontline has gone on a shopping spree for companies whose offerings range from hiring and recruiting tools (Teachers-Teachers) to professional development providers (School Improvement Network and Teachscape) and special-education software (The Centris Group).

Altogether the company says it serves more than 12,000 education organizations, with more than 5 million school employees and 1.2 million substitute teachers using its tools everyday. No doubt the acquisitions helped Frontline expand its footprint. Its revenue, according to Clifford, has been growing at 50 percent annually for the past several years.

Frontline currently numbers 650 employees in five offices across the U.S., a headcount will continue to grow. Insight Venture Partners will retain a minority stake in the company.

It should be pointed out that Frontline made some bold claims in that article, given the department of education’s estimate of ~3.6 million K-12 teachers in the US, for both public and private schools. I don’t know that it’s realistic to have “5 million school employees” in US & Canada K-12 schools, so take some of the corporate numbers with a grain of salt.

Months before the Bravo acquisition, Frontline introduced its Insights Platform as a data aggregation and insights play, as described in its press release in January 2017.

“Frontline Education continues to raise the bar in responding to the evolving needs of the education community,” says Tim Clifford, CEO, Frontline Education. “We’re driving industry innovation through both the Frontline Insights Platform and Frontline Central that will empower education leaders to use data and analytics like never before. The connectivity of technologies and processes in an intuitive and seamless way delivers the insights necessary to make informed decisions that have significant bearing on district outcomes.

In 2017 Thoma Bravo acquired Frontline from Insight Venture Partners in a deal reportedly worth $1.3 billion. Bravo viewed Frontline as the centerpiece in a platform buy-and-build, another name for an enterprise software roll-up strategy. In this strategy, a platform company with solid customer base in a particular vertical market (K-12 education in this case) is purchased (often for high price), enabling subsequent acquisitions of smaller companies that have lower price multiples, called tuck-in.

The Bravo acquisition, which the relatively new Frontline executive team actively started working on in early 2017, has not worked out as planned, however.

The forced upgrade caused by the Insights Platform appears to have caused significant customer pushback, according to comments on company review sites such as Glassdoor and Indeed, although it is not clear how much this was based on associated price increases.

What we do know, however, is that the company’s growth seems like it stopped. Prior to 2017 the company was growing 50% per year in revenue, but after the Bravo acquisition that growth seems to have stopped according to company interviews. 660 employees as of 2017, and 650 employees as of summer 2019, despite acquiring Prologic and its 60 employees in 2018. It remains to be seen how this past summer’s acquisition of Perennial EdTech and its 150 employees will change their business.

By summer 2019 the majority of the Frontline executive team, including its CEO, had turned over, with ex-Blackboard executive Mark Gruzin taking the helm in July.

An analysis of Glassdoor reviews includes consistent themes of corporate layoffs, company culture changes since the Bravo acquisition, and poor company performance in product integration. I’d like to avoid reading too much into these reviews, but I have found that you can find themes worth considering by looking at this feedback.

Similarities and Differences with Instructure

There are some interesting similarities between Frontline Education and Instructure worth considering, with Frontline:

  • Growing company with loyal customer base, at least until 2017;

  • Founders depart and new executive team takes over with few having education market experience, followed by formal sales process and Thoma Bravo acquisition under planned buy-and-build strategy;

  • Through acquisitions, company moves beyond best-of-breed product core to promise broad product suite, with associated rebranding; and

  • Company introduces a data platform as the core of its strategy at roughly the same time as it formally began soliciting and evaluating buyout offers, leading to an acquisition by Thoma Bravo.

But there are also some differences to keep in mind:

  • Frontline founded 10 years before Instructure and never went public; and

  • Frontline had longer history of acquiring companies prior to Insight Ventures Partners investment or Thoma Bravo acquisition.

Does this mean that Instructure’s fate will be directly tied to Thoma Bravo’s and Frontline Education’s past? No. But there are insights from this history that might inform what could happen with Instructure.

I’ll note that what follows is conjecture – more than I typically provide on this blog – based on research on Thoma Bravo and its holdings, as well as broader PE involvement in EdTech markets. If I find any of this analysis and conjecture are wrong, look for updates here.


The probability of a layoff within the first few months of the Instructure acquisition being complete is very high. This is part of what PE firms do, buying underperforming companies and making cuts to improve profitability – just ask Blackboard, Ellucian, McGraw-Hill Education, Cengage, University of Phoenix, etc. Even beyond Frontline Education, Thoma Bravo is well-known for having layoffs, as seen at Ellie Mae, Riverbed, Qlik, and Imperva. Significant layoffs. Further, Orlando Bravo makes no excuses for layoffs, as described in the Forbes profile.

There are also layoffs. Those can total as much as 10% of the workforce, for which Bravo doesn’t apologize. “In order to realign the business and set it up for big-time growth, you first need to take a step back before you take a step forward. It’s like boxing,” he says. “These are unbelievable assets with great innovators, and they are usually undermanaged.

While layoffs are almost a given, we don’t know yet how this would impact services and product delivery. Frontline’s experience is not encouraging, but perhaps Bravo has learned about the education market, and Instructure is a different company.

Price Increases

This section, unfortunately, will be short as there is no clear pattern in Thoma Bravo’s recent acquisitions with price increases. Frontline Education raised prices within a year of the Bravo acquisition, in combination with the Insights Platform required upgrade, but Riverbed seems to have waited three years for modest price increases.

It is worth noting that Bravo’s strategy relies on a loyal customer base. This should cause Instructure to be very cautious on price increases, but we just don’t know much.

M&A Strategy in 2020

Another point in the Forbes profile is that Thoma Bravo does not acquire a company and then figure out what other companies to tuck-in or combine [emphasis added].

Like a good tennis player who’s worked relentlessly on his ground strokes, Bravo has made private equity investing look simple. There are no complicated tricks. He figured out nearly two decades ago that software and private equity were an incredible combination. Since then, Bravo has never invested elsewhere, instead honing his strategy and technique deal after deal. He hunts for companies with novel software products, like Veracode, a Burlington, Massachusetts-based maker of security features for coders, or Pleasanton, California-based Ellie Mae, the default system among online mortgage lenders, which the firm picked up for $3.7 billion in April. His investments typically have at least $150 million in sales from repeat customers and are in markets that are too specialized to draw the interest of giants like Microsoft and Google. Bravo looks to triple their size with better operations, and by the time he strikes, he’s already mapped out an acquisition or turnaround strategy.

Instructure fits into this playbook, and I suspect that we won’t have to wait long to see the next move. It could be tuck-ins in the vein of Portfolium, Practice, or MasteryConnect, or it could be something bigger and market-changing. It is worth noting that Bravo raised $12.6 billion in January of this year – the stakes are getting higher.

The latest fund is two-thirds bigger than its $7.6 billion predecessor, Thoma Bravo Fund XII, which was raised in 2016, and more than three times the size of Thoma Bravo Fund XI, which totaled $3.65 billion when raised in 2014.

Forbes noted the higher stakes as well.

With a fresh $12.6 billion war chest for its 13th fund raised in 2018, Bravo is eyeing $10 billion-plus deals and expects to begin buying entire divisions from today’s technology giants. But thanks in part to the success of his firm, he now faces more competition. Heavyweights like Blackstone and KKR are increasingly sussing out software deals, not to mention his longtime rival Vista Equity. And he’s not immune to mistakes. Bravo’s $3.6 billion 2015 acquisition of San Francisco-based digital network tracker Riverbed Technology is currently struggling because of slowing sales and too much debt. He isn’t worried. “There are bigger and better companies to fix than there were ten years ago,” Bravo says.

Higher Ed to Follow K-12?

In the K-12 market, the Bravo-owned Frontline Education’s roll-up strategy is mirrored by the Vista Equity Partners-owned PowerSchool. Two PE-owned firms working to buy and consolidate around a data integration and insights platform play. We have seen PE activity in higher ed, but it looks as if the consolidation part of PE ownership might become an emerging theme into the future. I have already written about Ellucian’s possible sale and the wave of EdTech acquisitions, and the pending Instructure sale to Thoma Bravo, as well as the McGraw-Hill – Cengage merger, are signs of the future.

We’ll keep watching for news over the next few weeks and share it in the blog.

Disclosure: Instructure is a subscriber 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 Disclosure: Instructure is a subscriber 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.