For more than two decades, Jonathan Grayer has made a career out of welding educational companies. The former Kaplan executive, who served as its CEO from 1994 to 2008, oversaw 67 acquisitions that turned the test-prep business into a global education services provider. In 2010, he pooled his own money with KKR, a private equity firm, to launch Weld North, which has since acquired another 16 edtech companies (and invested in 4 others).
This week, KKR announced it has sold its majority stake in Weld North Education, a subset of the overall Weld North portfolio, to Silver Lake, another private equity group whose holdings also include Dell, GoDaddy and Symantec.
As a result, Silver Lake will own a majority share of Weld North Education, which Grayer will continue to run.
The deal comes after KKR’s allotted capital for its investment in Weld North, which came from KKR’s 2006 fund, had run out. “They had no capital left for us to grow,” Grayer tells EdSurge in an interview. But expect more deals to come. “Silver Lake and I are very open in saying that the reason we came together is to add to the Weld North Education portfolio through acquisitions.”
Financial terms of the deal were not disclosed. In a prepared statement, a KKR spokesperson said that its investment in Weld North has been “gratifying both in terms of financial results and societal impact.”
On paper, Weld North Education is made up of three companies: Edgenuity, a provider of online K-12 courses; Generation Ready, which offers K-12 professional development services; and Imagine Learning, which offers math and literacy software for elementary-grade students. Gray describes these as three separate “divisions,” each with their own sales operations.
Yet that’s not all. These three companies include other assets that Weld North has acquired over time. Overall, nine of the 16 companies purchased by Weld North are part of the group now owned by Silver Lake.
For instance, Weld North acquired Compass Learning, a suite of digital math and English curriculum materials, in August 2016 and combined it with Edgenuity. Two months later, it did the same digital math program Think Through Learning, which is now a part of Imagine Learning. Across the products and services offered by the nine companies, Weld North Education claims users in more than 3,000 school districts.
Other Weld North companies, including Performance Matters and The Learning House, are not part of the Silver Lake deal.
Over the past three years, private equity groups have upped their stake in education technology companies. They generally purchase one core company, and add pieces through further acquisitions as part of a platform strategy to sell related products and services with streamlined operations. In 2015, Vista Equity Partners purchased PowerSchool, a student information system, and has since acquired another eight education companies. Frontline Education, which provides a suite of school administrative and human resources software, recently swapped private equity owners (from Insight Venture Partners to Thoma Bravo). Most recently, Hero K12, which started as a student behavioral management tool, received more than $150 million from BV Investment Partners to assemble a platform of educational data services.
What sets the Silver Lake deal apart, Grayer claims, is that the Weld North Education is “the first deal of this size in the curriculum space.” He declined to share details around how much revenue the Weld North Education companies are generating.
“As digital curriculum businesses grow, they will become interesting assets for private equity groups,” Grayer adds. Yet he cautions that educational content companies are a “slow build.” Most “tend to plateau at $20 million to $30 million” in annual revenue, he estimates.
Many of the companies that are now part of Weld North Education have been around for more than a decade: Edgenuity (formerly known as e2020, founded in 1998); Generation Ready (2000); Imagine Learning (2004); Compass Learning (1969, then known as Prescription Learning); Think Through Learning (2002).
Grayer, who has built his career in the education industry, says he’s seen “a lot of bubbles come and go,” from the days of educational CD-ROMS and Carmen Sandiego games of the late 1990’s. Currently, he predicts, the financiers in the edtech industry will focus on consolidating revenue-generating businesses. “The trend will be about scaling businesses, not starting new ones.”
