Since 2008, there have been 135 private ed tech companies acquired. Because these are private companies being acquired, valuations are often not disclosed, but CB Insights has valuation data (both rumored and real) for over 1/3 of those transactions (50). With our new Valuation Multiples capability, we also have multiples data for many of these deals (price/sales multiples) as the result of also aggregating rumored and real financial and operating metrics data (revenue and sales figures primarily). (Related: Here are 2012’s most active Ed Tech acquirers)
Since 2008, the median price/sales multiple of private ed tech company acquisitions has stood at 2.04x and the average at 2.98x. The graphs below highlight the ed tech M&A valuation multiples trend from 2008 to 2012 and then highlight and compare these price/sales valuation multiples to publicly traded education-oriented companies.
While there has not been a consistent trend up or down for ed tech valuation multiples, 2012 saw a bump after a slight pullback in 2011 with a median price/sales of 3.43x and average price/sales of 3.16x. Despite the uptick in ed tech venture capital and chatter about an ed tech financing bubble, valuation multiples have stayed well within historical ranges.
However, when comparing private ed tech M&A multiples to publicly traded education-oriented companies, a significant premium does exist for private companies based on where they “trade”. Public company median P/S multiples stand at 0.97x and average P/S multiples at 0.88x (these are Trailing Twelve Months figures taken from Bloomberg), and as previously highlighted, their acquired private company ed tech brethren are more than two to three times greater (median multiple of 2.04x and an average at 2.98x). This “premium” ultimately makes sense as these private ed tech companies are being purchased not for today’s results but for their growth potential or their ability to accelerate growth of the acquirer in some way.
As the education space is evolving (or being disrupted depending on your perspective) and as incumbent firms seek out new channels, technologies and innovation to maintain and grow their businesses, it will be interesting to see where valuation multiples go. We are seeing some early indications that multiples may already be climbing in 2013.