EdTech M&A

By Nihat Anwar (SSE), Gurneek Gill (UCL), Mustafa Bayramli (Wharton), and Roshni Padhi (Stanford)


I. Industry Background

The education technology (“edtech”) industry refers to the integration of digital tools and processes to improve learning environments. Currently valued at $89.07 billion, the market is expected to grow at a CAGR of 18.1% to $285.23 billion in 2027.

The industry can be broken down into three large segments: preschool, K-12, and higher education. While the preschool segment is projected to grow at the fastest rate with its focus on app-based learning for younger students, the K-12 segment currently accounts for the largest revenue share, providing experiences such as virtual field trips, online collaboration for group projects, and digital lab-based experiments. The higher education segment is the most heavily funded with the goal of connecting students to employment opportunities, as well as preparing students for them. The concept of lifelong learning using Massive Open Online Courses (MOOCs) has also been a growing trend among adults, allowing for increased flexibility. That being said, the majority of end-users in the market are businesses, indicating that the number of partnerships between edtech startups, content developers, and educational institutes are projected to increase through M&A.

One major tailwind accelerating progress in the industry has been quarantine measures related to the pandemic. COVID-19 outbreaks caused school closures in 190 countries, impacting 1.6 billion learners globally. The transition to fully remote learning has required a fundamental shift in the way that edtech tools operate in the classroom, resulting in the number of worldwide education app downloads surging 90% since Q4 of 2019. Teachers have also shifted from focusing on just one online learning tool to building a collection of edtech tools to better serve their teaching needs.

II. Discovery Education Acquires Mystery Science

On October 30th, 2020, Discovery Education announced the acquisition of the Mystery Science curriculum. The terms of the deal have not yet been disclosed to the general public, but according to EdSurge, the value of the transaction was approximately $140 million. Mystery Science will keep its brand and operate as a subsidiary.

Discovery Education provides digital educational content for 45 million students around the world. Mystery Science provides creative multimedia science and STEM lessons for K-5 classrooms. Mystery Science’s lessons are unique in the sense that they help students and teachers explore science “mysteries” by collaborating together through different activities. The company aims to be the future of education and is considered to be the global leader within the K-12 market segment -- the contents and materials are used by four million students in the U.S. on a monthly basis.

With this deal, Discovery Education wishes to further develop its strengths in the K-5 segment by using the target’s creative digital solutions, while Mystery Science can catalyse its growth by utilizing the acquirer’s global reach and district relationships.

The transaction is an example of the buzzing M&A activity in the sector, specifically the recent wave of edtech consolidation. According to industry experts, smart and targeted content is considered to be a key competitive advantage moving forward. It is therefore vital to become and remain differentiated; from the eyes of the acquirer, this deal could be their move into a more differentiated product offering.

III. PowerSchool Acquires Hoonuit

On October 29th, 2020, PowerSchool announced the acquisition of Hoonuit. The financial details of the deal have not yet been disclosed by either company. PowerSchool is the largest provider of K-12 education application technology in the U.S. and supports around 45 million students in over 80 countries with its current services. Hoonuit mainly provides data analytics, warehousing, and visualization tools for schools and education agencies. It supports almost 15 million students in the U.S. with its leading K-12 analytics and data management solutions.

Although this merger