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Blackboard Acquisition – What Does It Mean? Pt 1

As anyone involved in Educational Technology is aware, Blackboard has entered into agreement with Providence Equity Partners, a private equity firm, thus ending months of speculation. In this post, I will summarize what we know, what we think we know, and what is the public position of the players involved. In subsequent post(s) I will add my thoughts and commentary.

What we know, with a fair amount of accuracy

What we think we know, based on educated guesses or independent sources

  • A private equity deal means that they see increased cash flow from continued operations.  From an Inside Higher Ed article, “Blackboard’s transition from publicly traded company (its status since 2004) to private equity holding could indeed mean a greater emphasis on earnings, says Trace Urdan, a senior analyst at the investment firm Signal Hill. The new owners will not have to worry about feverishly acquiring other companies in order to make the company’s stock price go up, Urdan says. More likely, Providence will treat its new investment like a cash cow, focusing on the Blackboard products that reliably make money and possibly unloading the ones that do not.”
  • Blackboard has been the dominant LMS player in higher ed; however, by all objective surveys, Bb is losing 5 – 10% of the US higher ed market each year.  We’ll leave the for-profit sector out of the equation for now, as these surveys do not capture that data.  Given ~3,500 public and private not-for-profit schools total, that means that more than 200 schools are moving away from Blackboard each year.  Below are some of the publicly available surveys.
  • Blackboard’s has finished a spate of acquisitions in 2009 and 2010, purchasing Angel, TerriblyClever, iStrategy, Elluminate, Wimba, Safe-T-Net, and Presidium.  They do not plan on any significant acquisitions in 2011 based on earnings conference calls.

What Blackboard and Providence are saying publicly

  • Providence was attracted to Blackboard’s portfolio of products based on the acquisitions, and they have been impressed with Blackboard’s management team.
    • “We are very familiar with Blackboard through our extensive education investments over the years and have tremendous respect for what the Blackboard team has accomplished,” said Peter Wilde, a Managing Director at Providence. “Given its exceptional brand, technologies, client base and the depth of its team, we believe Blackboard will continue to drive and benefit from the increasing penetration of digital technologies and content in schools around the world. We are excited to put our resources and hands-on experience in the education and communications sectors toward supporting Blackboard’s growth over the long-term.”
  • Blackboard is going out of their way to state that there will be no major changed to the company in the short term. Same management, same pricing, same products, same markets.  “And I’ll reassure you that we expect our pricing practices to remain within historical norms for the foreseeable future.”, from Ray Henderson’s blog post.  From Michael Chasen’s client letter, “I and our management team will remain in place and we do not anticipate any changes to our day-to-day operations and practices”
  • The position put for by Blackboard is that they will have better capability to invest in the future with private ownership, now that they do not have to satisfy a handful of large institutional investors.