Why Partnerships Between Education Companies Succeed or Fail

Senior Editor

Boston

Finding the right partner–through a merger, acquisition, or another type of business deal–is often essential for education companies trying to grow, beat out their rivals, and anticipate schools’ shifting needs.

But that matchmaking requires a lot of research and clear-eyed predictive thinking about what the pairing will bring to both sides, according to a group of company executives and investors gathered here this week.

Four participants on a panel at this week’s LearnLaunch conference offered advice to startup companies on what to look for in partnering with big players and other education-focused business. They also provided insights on how they’ve approached their own deals.

Hosted by the LearnLaunch Institute, the conference draws both startup ed-tech companies and executives from some of the biggest vendors in the school industry, along with the people they’re ultimately trying to impress: K-12 educators.

One of the biggest mistakes upstart companies make in pursuing partnerships is failing to recognizing what a prospective deal will accomplish, and what it will not, said Mark Miller, a managing partner at investment bank Good Harbor Partners.

“One of the critical dangers for those of you who are running companies is to imagine a partnership as your pathway to getting into the market, and not to have your own pathway,” said Miller, who moderated the panel.

That means “your own pathways to sell, your own capacity to get to customers,” he said.

Big companies looking to acquire smaller ones weigh the merits of a proposed deal by a number of clear metrics and intangibles, Miller said. One of their main considerations is usually whether the smaller business’ executives will bring value to the merged company.

Miller also encouraged education companies to think early about whether other education businesses they’re already working with on some level might eventually become formal partners, if their goals align.

“There are conversations where people are not clear enough that there really is an opening,” he said, and that there are the conditions that may “lead to a deal.”

Judah Karkowsky, senior vice president and head of corporate development at Cengage, a Boston-based provider of digital learning materials, said his organization is looking to keep on top of trends in the market and adjust its strategy. Cengage looks to work with other companies that can bring expertise in new areas.

“We can’t be everything to everybody,” Karkowsky said. “How do we find ways to expand both our reach and our value and not have to build it ourselves?”

A Failure in Execution

For startup education companies, even those that aren’t thinking of getting acquired, there are clear advantages in partnering with major players in the K-12 market, because of the scale they bring and the advantages they have in getting a new product in front of teachers and students.

Big companies with scale have that power, and “when you achieve market penetration, you’re a breakout company,” Miller said. “There aren’t many of them.”

One of Miller’s co-panelists was a representative of just such a huge education brand: Todd Brekhus, the chief product officer for Renaissance, a Wisconsin-based provider of classroom and assessment products.

Brekhus served as president of myON, a provider of classroom products and content libraries, until it was acquired by Renaissance last year. He’s been involved in numerous partnerships and acquisitions throughout his tenures at myON and Renaissance.

Renaissance has an enormous footprint–Brekhus estimates that it delivers 85 million assessments per year. It’s actively looking for partners that can add new dimensions to what it does, through new or improved assessments, banks of test items, and other strategies.

“We’re looking to acquire,” said Brekhus, and “a great way to look for acquisitions is to start as partners.”

Eric Cantor, the president and CEO of Paradigm Education Solutions, which provides career-prep-focused courses for students, said he’s been in good and bad partnerships, and “the key is how you differentiate those so that you don’t waste time.”

In the pairings that work, the two companies share a vision, and their “ecosystems overlap” in a way that makes it feasible to bring together their platforms and products seamlessly, he said.

Paradigm Education Solutions is constantly looking to enhance its digital platforms and environments. The goal is to work with vendors that “intersect, play with what [we’re] already offering in the marketplace,” said Cantor.

Business deals between education companies tend to fall apart when the two sides spend “an inordinate amount of time getting to a deal, getting to a partnership,” working out that agreement, added Cantor.

“You celebrate the press release but you don’t really spend as much time on the execution side.”

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