Wiley Exits OPM Market With Sale to Rival Academic Partnerships

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Yesterday Academic Partnerships (AP) announced an agreement to acquire its rival OPM unit Wiley University Services.

The basics of the deal:

• The deal is expected to close in early 2024.

• The purchase price is $110 million cash plus up to $40 million in earnouts (based on performance) plus 10% of the shares of Academic Partnerships.

• The combined company will have 125 college / university partners with hundreds of online programs. Wiley has listed roughly 70 university partners, meaning that AP likely has just under that amount.

• Academic Partnerships has a different client mix than Wiley, focusing more on regional public universities, whereas Wiley has more of a broad mix of clients and regional private universities.

• Wiley is a publicly-traded company, and Academic Partnerships is owned by private equity firm Vistria Group after its 2019 acquisition.

In an interview with Education Dive I pointed out the painful finances for the OPM market.

To better understand why this acquisition is a sign of painful OPM finances, it helps to look at the historical context. tl;dr - Wiley paid $540 million to create and grow Wiley University Services and is now selling for just $100 million up front and less than $200 overall.

Historical Context

The origins of Wiley’s OPM unit date back to the mid 1990s, as described in Deltak’s archived web page.

For those keeping score, Collegis has reconstituted as an OPM provider and is active today, and SunGard Data Systems has morphed into Ellucian. A tangled web.

In the late 2000s, Deltak emerged, along with EmbanetCompass and Academic Partnerships, as three of the largest providers in what would become known as Online Program Management (OPM) market. 2U (then known as 2tor) joined them in 2008. For the remainder of this post, all financials will be inflation-adjusted to 2023 dollars.

From my post on Pearson exiting the OPM market:

The same month as the EmbanetCompass acquisition (October 2012), Wiley announced its agreement to acquire Deltak for $291 million. At the time Deltak had $71 million in revenue.

The period 2012 - 2019 was the heyday of the OPM market, and in 2018 Wiley acquired another OPM provider, Learning House, for $245 million.

These two acquisitions - Deltak and Learning House for a combined $540 million - formed Wiley University Services, that company’s OPM unit.

Compare and Contrast

The moves by Pearson and Wiley to exit the OPM market despite being two of the largest providers have some comparisons. The primarily similarity is the somewhat distressed sales of OPM units that were holding back the transformation of companies moving past the traditional publisher model.

At the same time, Pearson was much more distressed, selling its OPM business for no up-front money (only a percentage of future earnings on revenue or a subsequent sale), whereas Wiley is getting a minimum of $110 million plus AP equity, and the potential for an additional $40 million. Pearson lost two of its three biggest clients (Arizona State University and Ohio University) whereas Wiley has no high-profile defections of that size.

Why Did Wiley Want to Sell?

The immediate issue from an OPM perspective is that Wiley University Services has been losing revenue with no signs of returning to growth.

Wiley reported full year FY2023 revenue of $208 million, with an 8% reduction from the prior year. Just two years ago, however, Wiley reported $259 million in OPM revenue, with growth of 8%. Note that 2020 and 2021 brought a significant pandemic boost to revenues.

While Wiley’s OPM business has been in decline since its 2021 peak, it has not lost its highest profile customers as Pearson had (ASU and Ohio University, with the latter ironically moving to Wiley).

Put simply, the Wiley University Services OPM business has no longer been a growth business and is shrinking.

Why Did Academic Partnerships Want to Buy?

Yesterday’s press release stated the nominal reasons for the acquisition.

I would argue that an unstated reason is the opportunity to pick up this business for a discount. As stated in an Inside Higher Ed article this morning:

If you believe there is growth in the OPM market, buying a rival on the cheap is a great opportunity.

In a phone interview with AP CEO Bleichmar, he described additional context for the acquisition. When I asked him for more insight into the acquisition and whether the companies have a similar focus, Bleichmar said the answer is simple. Both companies have a similar focus in the market, AP with regional public universities emphasizing workforce-needed credentials and Wiley with regional private universities.

From my perspective, AP has had much more of a stated focus than Wiley. You know ahead of time what AP is about and who their clients are, whereas Wiley was far more diverse, and importantly it is difficult to understand Wiley’s area of focus until you deeply evaluate its OPM offering (e.g., in an RFP or tender process).

Bleichmar agreed that Wiley also had a presence in top tier and national-brand universities and even international clients, both of which provide opportunities for AP.

Moving Forward

Assuming the deal goes through, there are certain elements that we should expect moving forward.

Bleichmar pointed out that Wiley has developed fee-for-service business models, which can help with today’s regulatory environment that can be described as hostile to revenue sharing (my words).

I asked if there would be one or two brands within the company, and Bleichmar responded that this would be a single brand under a single company. That brand may not be Academic Partnerships, however. As part of the integration process, Academic Partnerships will review the best path forward on that front as well.

What is not known yet but worth watching is the impact of this acquisition on the broader OPM market. We do know that if the deal goes through Academic Partnerships will join 2U / edX and Coursera primarily (and Boundless Learning secondarily) as the biggest OPM providers. Stay tuned.

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