Noodle HotChalk Deal: More fire sale and less acquisition

It’s already time to modify the OPM Landscape and OPM Market Dynamics graphics that were released less than a month ago. Last week Noodle announced a deal that shows the continued turmoil of the Online Program Management (OPM) market.

Noodle, which helps dozens of top US universities build and grow their online and hybrid programs, today acquired key assets of HotChalk, a leading online program manager (OPM), effective today, November 19, 2020. The industry leader will absorb HotChalk’s portfolio of programs and their acclaimed marketing, enrollment, and technology teams. HotChalk CEO Rob Wrubel joins Noodle as Chief Marketing Officer.

With this acquisition, Noodle assumes HotChalk’s partnership with NYU’s Steinhardt School, for its Teacher Residency and EdD Leadership and Innovation programs, #10 ranked in U.S. News and World Report. It also welcomes one of the nation’s leading higher education marketing agencies, Creative Communication Associates (CCA), which brings 40 years of experience in the higher education marketing space and HotChalk’s programs with Concordia University, Nebraska, and Concordia University, Chicago.

There have been several good articles worth reading on the transaction:

Falling Apart

The key to understanding this transaction is to not view it as consolidation with one OPM provider acquiring another. It is better to view this as a fire sale, where Noodle bought parts of a failed company – CCA and the NYU account – to help it further shift its position in the OPM market. Think Wiley buying Knewton for a reasonable analogy.

HotChalk has had a troubled history despite its $230 million investment from Bertelsmann in 2015. As an OPM, HotChalk was mostly a one-client company, deriving the majority of its business from Concordia University of Portland. Concordia announced earlier this year that it was shutting down at the end of the Spring 2020 term, leaving HotChalk with NYU and a handful of other smaller accounts. HotChalk was not consulted about the school closure and has sued the parent organization of Concordia for $302 million, seeking status as a creditor. When I asked the company for a statement about its financial prospects, the spokesman gave a non-answer that “HotChalk remains confident in the quality of our work, the students we support, and the value of our services.” At the time, HotChalk had already laid off half of its staff. By the fall, the company was ready to be sold for parts (i.e. “key assets”).

Moving Towards the Mainstream

Noodle is in the middle of dealing with the chaotic OPM market, where companies need to have reasonable financial resources and scale to survive. Noodle has recently consolidated its Noodle OPM and “Google for education” program search businesses and rebranded from Noodle Partners to Noodle. The company also raised a $16 million investment round in June.

By buying CCA, Noodle further moves beyond its general contractor roots to bring in-house the digital marketing business that had a larger client base, going beyond OPM partners, than did the parent HotChalk. Add this to Noodle’s offering revenue share options along with fee-for-service, albeit with shorter contract terms than most other OPM providers. Hence the changing direction of Noodle, moving closer to the mainline models.

Updated Market Graphics

We have since revised our OPM Market Landscape and OPM Market Dynamics graphics to account for this deal, (while expanding All Campus to include Certificate programs).

OPM Market Landscape Fall 2020, revised by Noodle acquisition of assets from HotChalk

As HotChalk has demonstrated, this is a chaotic market that is not for the faint of heart, and one that will likely see further consolidations and category changes. All of this in a Mad Max-style pursuit of college online program revenue while noting that the 2020 pandemic causes its own risks to the college revenue itself. Yes, online programs will likely benefit from the acceleration of online learning, but this is happening within institutions that often are facing significant budget cuts overall.

OPM Market Dynamics, Fall 2020, revised by Noodle acquisition of HotChalk assets and by pandemic risk for college revenue