Schools aren’t the only entities gearing up for the Common Core State Standards. Weld North, a private equity firm founded by a former Kaplan executive, purchased two school-improvement and professional-development companies, Editure and JBHM Education Group, the company announced Monday. The deal, worth around $50 million and for a 100 percent stake in each company, will create a national school consulting group that will compete for an increasing flow of money dedicated to school improvement and preparation for the Common Core State Standards adopted by all but four states.
Editure is a New York City-based company that focuses on professional development for teachers and administrators, and sells software that helps with p.d. efforts. It is perhaps best known stateside for its large contracts to train teachers in New York City, which were won by AUSSIE, an Australian educator-training company that merged with Editure in 2007. JBHM, among the largest school improvement companies in the country, is based in Jackson, Miss., and provides school-turnaround services and professional development for many schools and districts in the southeast. It charges about $50,000 to $100,000 for its school-improvement service, and partnered with Renaissance Learning for a $100,000- to $500,000-service aimed at schools receiving federal School Improvement Grant funds, according to a recent report by the State of Arkansas Bureau of Legislative Research.
The two companies will be merged into one company—not yet named— with about 75 employees and 300 contractor consultants. There will be redundancies, but cost savings will be re-invested into the company, said Jonathan Grayer, the chief executive officer of Weld North, based in Greenwich, Conn., and the former CEO of test-prep and higher education company Kaplan Inc. The new company will be headed by Justin Serrano, a former president of Kaplan’s K-12 operations.
By taking JBHB’s regional power and merging it with Editure’s regional contracts and accompanying software, the goal is to create a company that can compete with more established national players, as policy trends open up more opportunities, Grayer said, in a phone interview.
As schools get ready to adopt the common standards—common assessments will be delivered by 2014-15— they will have a tremendous need for service providers that can help smooth the transition, he said. And with federal Title I money slotted for school improvement contracts, there is also the possibility that the increased rigor of the common standards will put many schools in a position to need help, Grayer said. That’s why major deals in the education space are likely to focus on services, rather than the typical focus on technology, said Mary Jo Zandy, the managing director of Berkery Noyes, an investment-banking firm based that represented JBHM in the deal.
In a story I wrote last month, Robert Lytle, the head of the education practice for Parthenon Group, a consulting firm, made this exact point: where there are low standards on state assessments, there will be low scores on the common assessments, and education companies could help close the gap. Grayer has seen Parthenon’s theories on that trend and said it aligns with the reasoning behind this deal.
“For states to perform, they will have to change things and changing things require help,” he said.
Grayer founded Weld North in 2010 to make investments in education companies and has since executed a handful of deals to create a portfolio worth about $200 million in equity, he said. Last summer, Weld North acquired E2020 Inc., a company that develops online curriculum for middle and high schools. Online learning and personalized learning are opening opportunities for companies like the new one Weld North is creating, Grayer said.
Typically the sale of instructional materials, products, and supplemental services like professional development have been dominated by the “big three” publishers—Pearson, McGraw-Hill, and Houghton Mifflin Harcourt— and Scholastic Inc., which use large sales forces to capitalize on byzantine and rigid adoption laws, Grayer said. But as schools move toward a national set of standards and simultaneously begin to rethink how they operate— with federal dollars awarded to those that do both— there is a chance for disruption.
“To meet the measurement standards of common core and take advantage of the new and evolving learning tools requires fundamental change in how the school day is imagined,” Grayer said.
For that disruption to happen, though, companies like the Editure and JBHM venture will have to prove a positive impact on academic performance.
A June report by Sarah Garland in the Hechinger Report looked at the lack of oversight in how professional development dollars are spent in New York City. (A recent story by my colleague Alyson Klein highlighted a similar trend among consultants hired using SIG money.) The Hechinger Report focused on AUSSIE, which is now owned by Weld North. AUSSIE received about $15 million of the roughly $100 million New York City schools spent on professional development in 2011, Hechinger found.
In the story, AUSSIE is lauded for its work with schools, but it’s also noted that there are no independent studies into the efficacy of its work. The fact that it’s staffed mostly by former teachers, principals, and superintendents seemed to help its cause among educators quoted in the piece. JBHM is founded by Mike Walters, a former superintendent in Tupelo, Miss. from 1990 to 1995 (hat tip to Chris Kieffer at the Northeast Mississippi Daily Journal for the info). The Arkansas report found, in that state, JBHM produced academic-performance gains above the average for schools not contracted to school-improvement companies, but JBHM’s clients’ gains were in the middle of the pack among schools under contract with consultants.