M&A in Education Industry Drops in First Half of 2023

Staff Writer

Amid uncertain macroeconomic conditions and rising interest rates, mergers and acquisitions in the education industry dropped sharply in the first half of 2023, according to a new report from investment banking firm Berkery Noyes.

The total volume of transactions in the space sunk by 25 percent from the second half of 2022, from 231 at the end of last year to 173 in Q1 and Q2 of this year.

Total transaction volume in the half saw an even more dramatic decline of 71 percent, from $11.3 billion to $3.3 billion in consecutive half years.

Some of the pullback came from a reduction in activity from private equity buyers, which represented just 52 of the deals closed in the first half of the year. The prior year’s Q3 and Q4 saw 72 private equity deals.

The drop in private equity activity comes as investors across industries remain cautious about executing large deals, pointing to broader concerns about the economy, higher costs of borrowing, and inflated valuations.

Deals with strategic investors have also declined in the first half of the year, the report found, dropping 24 percent in the first half of this year to 121, compared to 159 in the second half of 2022.

Interestingly, the report noted, the highest activity was in the K-12 media and tech space, representing 44 transactions. The largest in the past two quarters was London-based international school network Nord Anglia Education’s $1.25 billion acquisition of IMG Academy, a sports-focused boarding school in Florida. Nord Anglia is backed by Boston-based private equity firm BPEA.

Other notable deals included University of Idaho’s purchase of the for-profit University of Phoenix for $550 million, Russian tech giant VK Company’s acquisition of Russian ed-tech company Uchi.ru for $117 million, and Indian ed-tech company Physics Wallah’s acquisition of United Arab Emirates-based Knowledge Planet Centre for $20 million.

Since 2021, when Berkery Noyes began tracking M&A activity in the education industry, the highest value of M&A transactions came in the first half of 2021 — when the the pandemic generated a surge of demand for ed tech that could help with remote learning, and interest rates were low.”

During the first half of 2021, M&A transactions hit $19.8 billion across 244 deals. While the dollar amounts dropped significantly in the following half,  the actual volume of deals has hovered in the mid- to low-200s, suggesting a smaller number of megadeals in the market.

Overall, however, Berkery Noyes said in the report that since the majority of buyers and sellers don’t publicly disclose financial terms, its data represent only part of the entire M&A landscape.

Since 2021, the firm has tracked 1,089 M&A deals in the education space, including those that disclosed financial terms publicly and those that kept the details of the deals private. Based on its data and projections, both disclosed and undisclosed deals combine represent an estimated $53.6 billion in M&A activity in the nearly three years.

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Image by Getty.

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