Online education is not new. Back in 2010, Kaplan University already had 75,000 students in its online higher education program. It grew rapidly and was highly profitable since online schools have lower costs than face-to-face campus delivery-based education.
But because of the pandemic, the entire educational sector was forced to shift in this direction, increasing competition. There has been a 40% increase in acquisitions since the pandemic, and interest in the education sector has exploded.
In this article, Tom Horton, Senior Vice President of Corporate Development & Strategy at Kaplan, Inc., talks about how M&A strategy has evolved in education technology.
“Acquisitions are hard to get right so don't over-complicate them” - Tom Horton
According to Tom, acquisitions are not always easy, which is why M&A is not their top priority when it comes to growth strategy. At Kaplan, they look at four different types of capital allocation:
Even though Kaplan is very careful before executing M&A, they understand the importance of proactively sourcing target companies. Kaplan likes to develop opportunities rather than reactively responding to the market. Participating in competitive bank processes will most likely cause an acquirer to overpay.
Kaplan looks at five criteria before considering an acquisition:
Before the pandemic, Kaplan used to have leadership conduct face-to-face meetings in an office. However, when everyone was forced to go online, Tom found virtual meetings more effective. They were able to broaden their audience and engage more leadership since there was no traveling involved and more people were available.
With online meetings, they were able to be more systematic with strategy sessions and come up with a more effective governing framework for their M&A strategy.