The recent reports that India’s ed-tech giant Byju’s is in talks to go public on the U.S. stock exchange by merging with a special purpose acquisition company is the latest sign of how SPACs could transform the landscape for private K-12 companies looking to hit the public markets.
SPACs are decades-old financial vehicles that experienced a boom in 2020 and 2021, raising record sums. They are publicly-traded companies with capital and no real business operation other than to merge with a private company in a deal that takes the private company public.
How it works: A group of investors create a shell company, navigate that company through the process of an initial public offering, and then use money raised in the IPO to acquire a private firm that will then be taken public via the merger.
They’re also called blank-check companies because investors pumping money into a SPAC don’t know what the eventual acquisition target will be. The SPACs generally have two years from the date of their IPO to find a deal or return the money to investors.
And sometimes a SPAC can acquire a company in an industry that wasn’t an initial or primary target.
Take Adit EdTech Acquisition Corp. The SPAC, according to a regulatory filing, was targeting “businesses in the education, training and education technology” industries. But in late November, the SPAC merged with bitcoin miner Griid Infrastructure in a deal valued at $3.3 billion.
Publicly-traded education companies remain rare, but there has been increased interest among investors and private education firms given the spotlight the K-12 market has been under with the pandemic and remote learning. The rejuvenated SPAC market has provided an extra boost to those efforts.
Several education companies have already taken the blank-check route by merging with a SPAC, a process that can provide a quicker route to the public markets compared to a traditional IPO and sometimes a higher valuation.
More education companies are expected to follow that path (and some, such as Powerschool, were approached by multiple SPACs; Powerschool opted for a traditional IPO, rather than moving forward with a SPAC to go public).
Here’s a quick look at three SPACs that have listed companies in the education and ed-tech industries as some of their primary acquisition targets:
Still in pre-IPO mode, Excolere Acquisition Corp. is targeting companies valued between $500 million and $2.5 billion in the education and human capital management sectors in North America, according to a regulatory filing.
Specifically, the SPAC listed as “attractive segments” within the education market that it could invest in: K-12 digital learning infrastructure and content platforms, along with tech-enabled services that support early childhood development and engagement. The SPAC is also targeting potential companies that focus on job upskilling and credentialing.
The SPAC highlighted what it referred to as “increasing linkages” across the education, training, and employer management ecosystem to enable improved student learning outcomes.
And the SPAC’s management team has some hefty experience in education, including Anthony Miller, who served as the deputy secretary and chief operating officer at the U.S. Department of Education as an Obama-era appointee. Miller was also a director with Silver Lake, a private equity firm that has invested in several education companies.
Also on the SPAC’s management team is Peter Davis, a former president of McGraw-Hill Education, who helped to transform the “publishing business into a digital learning company,” according to regulatory filings.
Excolere has yet to IPO, but recently filed a document with the Securities and Exchange Commission notifying regulators it was lowering the proposed deal size for its upcoming IPO from $200 million to $175 million.
This SPAC wants to capitalize on trends favorably impacting the education and ed tech, workforce development and human capital management industries in the U.S., and is looking to acquire one or more businesses with a value of $500 million or greater, according to a regulatory filing.
“We believe that there are over 90 target companies within Edify’s focus industries, and that the universe of scaled learning and talent management assets has increased dramatically in the last decade,” the company wrote in its IPO filing.
While those industries are the primary focus of the acquisition search, the SPAC says it could ultimately “pursue an acquisition opportunity in any business, industry, sector, or geographical location.”
In terms of education and ed-tech prospects, the SPAC lists the following as potential targets: PreK-12 and higher education operators, content and assessments, tutoring and test preparation, administrative software platforms, classroom and content delivery software platforms.
Like other SPACs targeting learning companies, the “growing acceptance of online learning” and “accelerating digitization of education” are trends driving the decision to look into acquiring an education or ed-tech firm.
One of its board members — Rosamund Else-Mitchell — is the president of education solutions at Scholastic, the world’s largest publisher and distributor of children’s books, as well as a provider of literacy curriculum, professional services, classroom magazines, and other children’s media. Else-Mitchell is also a former executive vice president of K –12 at Scholastic Education, and an ex-chief learning officer and executive vice president at Houghton Mifflin Harcourt.
The SPAC IPOed in January 2021 — raising $276 million — and has until Jan 20., 2023 to find a deal, according to a regulatory filing.
EdtechX Holdings Acquisition II
The SPAC raised $100 million in a December 2020 IPO and is focusing its search on businesses in the education, training, reskilling, human capital and education technology industries.
“We will seek to build an industry leading and sustainable acquisition platform of innovative, next-generation education and training businesses with attractive returns on invested capital,” the company said in a regulatory filing.
Geographically, the SPAC is looking to make a deal with a company in North America, with a “lesser focus in Europe and Asia,” excluding China. Companies of interest to the SPAC will need to be valued between $400 million and $2 billion.
[T]here are over 90 target companies within Edify’s focus industries, and that the universe of scaled learning and talent management assets has increased dramatically in the last decade.Edify's IPO Filing
The SPAC told potential investors in a regulatory filing that the education, ed-tech and training industries present not only global long-term growth prospects, but that companies in those sectors are largely under-represented on the publicly-traded U.S. markets. The SPAC also highlighted several market segments of particular interest with stable growth, profitability and that are early adopters of tech, including “the international school market” and “alternative education.”
This is the second SPAC created by its founders. The first — EdtechX Holdings Acquisition — went public in 2018, and merged with Meten Education, a company that delivers English language and future skills training for Chinese students, including the K-12 market, and professionals.
The SPAC has until June 15 — 18 months from the closing of its IPO — to find a deal.
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