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Pace of Mergers and Acquisitions in Education Market Jumps, New Analysis Finds

pace of mergers and acquisitions in education market jumps new analysis finds
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The total value of mergers and acquisitions in the education industry grew by more than 50 percent from the second half of 2020 to the first half of this year, as companies across the market rushed to add to their portfolios, according to a report by investment banking firm Berkery Noyes.

The overall number of individual M&A transactions also rebounded to pre-pandemic levels.

Education companies closed 240 acquisitions in the first six months of 2021, up from 222 deals in the second half of 2020, and 210 mergers in the first half of last year. There were 238 acquisitions in the education industry in the second half of 2019.M&AGraph

The total value of education acquisitions from January through June was $19.4 billion, largely driven by Platinum Equity’s $6.4-billion acquisition of McGraw Hill, the report noted.

Deals made during this period had nearly as much value as mergers and acquisitions for the full year of 2020, when they totaled $21.4 billion.

The investment group, which provides advice and financial consulting to middle-market companies in the technology and information sectors, tracked 1,152 education deals between 2019 and June 2021.

Private equity financed 40 percent of acquisitions during the first half of this year, 8 percent higher than the 2019-2021 overall average.

According to Berkery Noyes, 97 of the 240 deals during this time frame were financed by private equity, venture capital, or some other investment firm, the most in at least three years and a 131 percent increase over the first half of 2020.

Twelve deals in the first half of this year carried values of more than $100 million, and at least seven of those involved the K-12 sector. About one-third of the total transactions had values between $4.5 million and $54.6 million.

K-12 media and tech surpassed professional training services as the education industry’s most active market segment year-to-date.

There were about 50 acquisitions that involved professional training services and roughly 40 deals that involved K-12 media and tech in the second half of last year, while nearly 60 deals touched K-12 media and tech and about 45 deals covered professional training services in the first half of 2021.

The report showed a mixed picture for market activity in various segments for the first six months of this year compared with the second half of 2020.

The rate of deals in the childcare services and higher-ed media and tech spaces increased during this span, but the number of deals in professional training technology, higher-ed institutions, and K-20 services fell. Deals involving K-12 institutions remained stable.

In addition to the McGraw Hill acquisition, notable K-12 deals in the first half of 2021 included a Byju’s purchase of Indian tutoring provider Aakash Educational Services for $900 million, Renaissance’s $650 million acquisition of Nearpod, and Kahoot’s $435 billion addition of K-12 single-sign-on provider Clever.

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Congressional Bill Aims to Incentivize Education Companies, Schools to Sharpen Cybersecurity

congressional bill aims to incentivize education companies schools to sharpen cybersecurity
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A bill recently introduced in the House would help define best cybersecurity practices for K-12 vendors and outline new spending that could benefit certain education companies focused on online safety.

The Enhancing K-12 Cybersecurity Act, introduced June 17 by Rep. Doris Matsui, D-Calif., would task the Department of Homeland Security with establishing a program to circulate K-12 cybersecurity best practices, training, and lessons learned, and with recommending online safety tools for purchase by state education agencies and school districts.

The bill calls on DHS to consult with school IT vendors and cybersecurity companies in putting together the list of best practices.

Doug Levin, the national director for the K12 Security Information Exchange is lobbying for the Matsui bill, expects significant regulatory action at the federal and state levels around K-12 cybersecurity, though it’s difficult to say exactly when that will happen. The K-12 Security Information Exchange operates the K-12 Cybersecurity Resource Center, an online database that tracks K-12 cybersecurity incidents.

The House bill could face a steep climb to become law, as the House Education and Labor Committee currently has no plans to consider the measure, and companion legislation has yet to be introduced in the Senate.

Lawmakers failed to vote on a similar bill introduced in 2020, before the previous congressional term ended in December.

Schools are relying more on technology for remote learning, and policymakers are seeing the need to start imposing baseline internet safety expectations for school districts and vendors, he said.

With cybersecurity policies likely to tighten, school districts and government agencies will increasingly look toward education companies that have already crafted and adhere to a set of best practices for cybersecurity, Levin said.

If passed, the federal bill charts the creation of a DHS-run database that would recommend security tools and services for schools to purchase, and allow schools and states to find and apply for funding opportunities to improve cybersecurity.

H.R. 4005 doesn’t spell out how the money would be dispersed, so the federal government would likely issue further guidance on expenses that might qualify for any cybersecurity grants issued, if the legislation is enacted, Levin said.

In addition to defining best practices and outlining new channels for K-12 cybersecurity funding, the legislation proposes the development of a voluntary registry of K-12 cyberattack incidents, and would require yearly DHS reports analyzing cyber incidents across all levels of K-12.

Information to be collected into the registry may include descriptions of the incidents’ size, and whether each incident was the result of a breach, malware, distributed denial of service attack, or other method designed to cause a vulnerability.

“The bill certainly is responsive to the needs that members of Congress have been hearing from the field,” Levin said. “School districts are feeling under assault from ransomware.”

Levin has compiled data showing that many cyberattacks have targeted teacher and student data stored by education companies, not just within schools.

According to the K12 Cybersecurity Resource Center’s most recent annual report on the state of K-12 cybersecurity, at least 75 percent of all data breach incidents affecting public K-12 school districts resulted from occurrences involving school vendors and other partners.

The Federal Trade Commission has ratcheted up its focus on data breaches in K-12 recently, signaling a stricter enforcement posture toward companies that collect data on K-12 students and teachers.

Organizations endorsing the Enhancing K-12 Cybersecurity Act include the National Association of Secondary School Principals, the National Association of Elementary School Principals, the Council of Chief State School Officers, the National Association of State Chief Information Officers, the State Educational Technology Directors Association, and the Consortium for School Networking.

“As cyber criminals grow more sophisticated and aggressive, we must provide the resources and information necessary to protect our schools,” Matsui said in a statement. “The Enhancing K-12 Cybersecurity Act provides a roadmap and prepares our cyberinfrastructure for the threats of tomorrow.”

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How Will Districts Spend Their Slice of the New FCC $7 Billion Connectivity Fund?

how will districts spend their slice of the new fcc 7 billion connectivity fund
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EdWeek Market Brief surveyed district administrators on how they plan to spend new stimulus funds focused on out-of-school internet connectivity needs.

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Global Appetite for Digital Language Learning Tools Is Surging

global appetite for digital language learning tools is surging
Global market for lanuage learning takes off

The language learning market is undergoing a massive digital transformation as mobile tools designed to teach students those skills have soared in popularity during the COVID era, according to a recent analysis.

That trend could have big implications for the global K-12 marketplace, and the millions of students around the world learning English and other languages, as digital language learning resources are expected to continue evolving rapidly — developing more sophisticated behavioral learning functions and leveraging artificial intelligence.

Mobile language-learning programs and apps will also serve as the primary growth driver in a market historically dominated by offline —  in-person or classroom-based — offerings, according to the new research.

HolonIQ, a global research and intelligence firm, estimates the overall market for language learning tools will nearly double in size by 2025 to $115 billion. By then, digital learning language offerings are expected to account for about $47 billion of the market or 41 percent, up from a 20 percent share in 2019 (See graphic below).

“Through the depths of the pandemic we saw digital language learning just absolutely surge,” said Patrick Brothers, the co-CEO and co-founder of HolonIQ, said in an interview. “If you’re running a language learning organization, it’s safe to say, like most people in education nowadays, you’re thinking much more about digital.” 

Most people learning a new language are adults, Brothers said, but millions of K-12 students around the world attending international schools are required to study a second language, in many cases English. Many others are voluntarily learning English even if they’re not in international schools.

Brothers said the uptick in adoption of digital language-learning tools means more students attending international schools will be studying a foreign tongue in the future through an app, instead of just relying on face-to-face classroom instruction or a private tutor. K-12 students will be more likely to pursue their required language studies outside of the classroom via a mobile offering, he said, and in many cases, schools overseas will also start incorporating more digital language learning into their curriculum.

Some huge overseas markets — such as India, China, and Latin America — appear likely to jump on board with the growing use of mobile language-learning tools for K-12 students, he said, noting that in China parents can sometimes spend more for outside tutors to teach their children English than the cost of private school.

“In many of those markets English is a tool parents are willing to invest in,” Brothers said. 

Screen Shot 2021-06-23 at 4.25.29 PM

In 2020 — a year in which students around the world were predominantly attending classes remotely — the market for digital language learning tools increased from $12 billion in 2019 to $17 billion.

Meanwhile, the market for offline language learning administered in-person by a teacher or a tutor was valued at $29 billion 2020, down from $45 billion in 2019. 

Brothers said that decline was mostly due to Covid-19 travel restrictions and lockdowns. 

But HolonIQ estimates the long-term demand for campus-based or peer-to-peer language learning will rebound as COVID conditions improve globally. And demand for offline language learning could exceed 2019 levels by 2021, according to the analysis, which predicts that segment of the market could bring in $64 billion in revenue by 2025.

Currently, most offline language learners are spending an average of $1,000 to $3,000 a year. However, Brothers said the average annual spend for digital language learning ranges from $50 to $70 a year, essentially serving as an affordable alternative to in-person lessons or as an “on-ramp” for when families have the money to invest in offline language learning. 

Not only are the digital language learning offerings a generally cheaper alternative, Brothers said, but they’re improving in quality.

“It’s one area of learning where we’ve really seen the proper promise of personalized and adaptive learning,” he said, noting that AI and voice recognition will play an increasingly larger role in language-learning apps in the future. “You can tell when you use one of these language-learning apps that it’s really clever in how it’s trying to keep you motivated and learning the right thing.”

And the uptick of digital language-learning usage will undoubtedly spawn new companies into the market, as “we’ve seen in the last couple of weeks and months more and more smaller digital player language learners are getting funding and growing,” Brothers said. 

But the already dominant players — such as Duolingo — are expected to “get bigger and grow stronger,” he said.

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Sales of K-12 Instructional Materials Soaring, New Industry Estimates Show

sales of k 12 instructional materials soaring new industry estimates show
MB Market Trends May 20

Pre-K-12 instructional materials are just one slice of a publishing industry that broadly thrived over the past year.

Data released last week by the Association of American Publishers show that sales of educational instructional materials in March more than doubled, year over year.

Overall educational revenues for instructional materials climbed by $111.7 million, while revenues for pre-K-12 resources reached $61.4 million in March —  an 82 percent jump over a year ago.

Sales of higher education course materials rose even more sharply, reaching $50.4 million in March, a 179 percent increase over the previous year.

Education publishers’ gains over the past year have come at a time when public and private investment in education markets has soared. Federal lawmakers have approved three different stimulus measures, the most recent of which will channel $130 million into K-12 education. Venture capitalists poured $16.1 billion total into ed tech in 2020, $7.9 billion more than the previous record set in 2018.

One factor driving the increases in education publishers’ revenues: Two of the three largest state markets for vendors in terms of student population – Texas and Florida – purchased significantly more instructional materials this March than a year ago, according to AAP’s PreK-12 Books & Materials Monthly Report for March 2021.

Florida and Texas K-12 leaders bought $8.5 million and $2.3 million worth of pedagogical materials, respectively, showing increases of 331 percent and 137 percent over March 2020.

On the other hand, sales of instructional materials in California, the state with the largest K-12 population, dropped from $6.1 million to $3.9 million.

In addition to higher monthly sales, Florida also generated a sizable increase in revenues for instructional materials across the full years of 2019 and 2020, growing from $6.9 million to $11.4 million. During the same period, annual sales for California fell from $12.1 million to $10.1 million, and yearly sales for Texas declined from $7.8 million to $7.2 million.

The educational sales data account for materials covering reading and language arts, science, social studies, math, English as a second language, career and technical education, as well as miscellaneous other subject areas.

Other segments of the publishing industry have also seen their revenues increase over the past year. Consumer books grossed $743.9 million in March, a 34.2-percent increase year-over-year, while professional books generated $33.1 million, a 33.2-percent gain.

AAP released the information based on questionnaires they sent to publishers, the group said. The monthly reports draw revenue data from approximately 1,300 publishers.

Publishing sales for this year are more comparable to 2017-2019 levels than to industry revenues last year, which was a “tough” time for the industry, AAP said.

School buildings across the U.S. started closing in March 2020 amid the initial onslaught of COVID-19, forcing districts to quickly pivot away from traditional instructional methods and swiftly reprioritize their spending.

Though the publishing industry posted striking growth rates in March, the industry typically sees stronger performance over the summer, and so the next few months will provide a better indicator of the sector’s resilience, according to the AAP.

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The Ed Tech So Valuable That It Will Outlive the Pandemic

the ed tech so valuable that it will outlive the pandemic
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An EdWeek Market Brief survey asked district leaders what kinds of ed-tech they will continue using after the COVID-19 pandemic.

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Why Do Ed-Tech Products Soar in Some Districts, But Flop in Others?

why do ed tech products soar in some districts but flop in others
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The EdTech Genome Project aims to give districts more accurate, granular comparisons of what ed-tech products work in what kinds of schools.

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How Close Are School Districts to Switching to Online Professional Development?

how close are school districts to switching to online professional development
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An EdWeek Market Brief survey asked district and school leaders whether the pandemic will accelerate a shift away from in-person PD, and if so, how quickly.

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Tracking School Reopenings in the Nation’s Largest Districts

tracking school reopenings in the nations largest districts
Wes Holmes, right, walks with is daughter Hollace Holmes after her first day of pre-kindergarten at Council Oak Elementary School in Tulsa, Okla., Monday, Nov. 9, 2020. Tulsa Public School returned to in-person instruction for kindergartners and pre-kindergartners on Monday, amid the coronavirus pandemic. At left is Dawson Holmes, 8, his son and Hollace's brother. (Mike Simons/Tulsa World via AP)

One of the chief obstacles facing education companies today in trying to figure out how to help schools is knowing whether districts are providing lessons remotely, in-person, or through some combination of both.

A new tracker, created jointly by Education Week and the Council of the Great City Schools, provides information on the reopening status of…

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K-12 Demand for Devices: Where It Stands Now and Where It’s Headed

k 12 demand for devices where it stands now and where its headed
MB Analysts View Feb 11

School systems’ demands for devices, both in the U.S. and internationally, has surged during COVID, even amid bottlenecks in supply, says Futuresource Consulting’s Michael Boreham.

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