You may have heard Blackboard’s announcement that it’s being acquired by Providence Equity Partners. If you are in the midst of an LMS Evaluation (like we are), you may be wondering what this news does to the level of service that Bb will be able to provide in the future. Though Bb CEO Chasen reassures us that everything will be just the same under the new regime, it’s instructive to look at what would motivate a private equity firm to buy Bb, especially since it’s been losing LMS market share quickly as viable alternatives emerge throughout the marketplace.
In Michael Feldstein’s article a while back–before we knew who the potential buyer might be–he speculated that it might be a private equity firm.
Let me take a little detour here and comment briefly on the possibility of Blackboard being acquired by a private equity company. Joshua Kim has publicly lamented about a potential acquisition of Blackboard by private equity as being bad for education. It is important to keep in mind that this would not be an entirely new phenomenon in the world of educational technology. SunGard, Datatel, and Cengage (my employer) are all owned by private equity companies. In general, there are two types of approaches that private equity takes to companies that they acquire. One possibility is that they milk the company for cash as much as they can and then sell off the parts. That’s the kind of approach that became infamous during the big leveraged buyout boom of the 1980s. But often private equity will buy a company because, for whatever reason, they think that company is under-performing and that they can turn it around relatively quickly. In that case, their goal is to build up the company and sell it at a profit, either to another private investor or through an offering on the stock market. It’s a bit like flipping a house. I make no judgment here about what the likely impact of private equity purchasing Blackboard might be. My point is simply that there is no particular reason to believe they would automatically do a worse job for customers than, for example, Google might simply because they are a financial services company.
It appears that Providence Equity believes Blackboard below its potential and wants to build it up into a more profitable company so they can sell it off at a profit. The Freedom of Information Act inquiries Feldstein referred to back then were all focused on universities that had left Bb for other competitors (especially open source LMSs). I think they were trying to figure out whether it was still worth its valuation despite the fact that it’s losing so much share of the LMS market. Their other products (like Bb Collaborate and Connect) may provide a larger share of the revenues as the company moves forward.
From the Bloomberg Article:
It’s the portfolio of technologies that Blackboard has built and acquired that makes them so attractive across online learning, mobile access to learning resources, distance learning, as well as tools to help schools communicate to their students,” Auty said in a telephone interview today.
I guess we will all have to wait and see what happens next. What are your thoughts?
- Blackboard Buyout Arrives, At Full Value (BBBB) (247wallst.com)
- Blackboard Seen Losing 50% Gain With Private Equity: Real M&A (businessweek.com)
- Some Caveats in Considering Blackboard as a Buyout Target (BBBB) (247wallst.com)
- Providence Equity Is Said to Be in Lead to Buy Blackboard (businessweek.com)
- Blackboard Shares Popped: What You Need to Know (fool.com)
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