Business Services Sector Comment – January 2017 – Education: Textbook publishers

Education: Textbook publishers are turning to M&A to build digital content

The textbook publishing market is undergoing a structural change as the industry transitions from paper based textbooks to more adaptive and personalised digital learning solutions. In light of this, publishers are utilising M&A to build their digital offerings in an attempt to future-proof their business models.

Textbook publishers are operating in an increasingly challenging market as enrolment numbers in the US fall and students demonstrate an increasing propensity to rent textbooks. This has allowed companies such as Chegg and Rafter to benefit. The situation is being accentuated by a number of heavyweights which have transformed the used book market. For example, Amazon entered the UK market in the 1990s following the dissolution of the Net Book Agreement and created a textbook rental service in the US in 2012.

The necessity for textbook publishers to morph into digital education providers is perhaps best demonstrated by the recent results of the leading players. In January, Pearson Plc reported its fifth profit warning in as many years, amid weaker trading in the US. The group is not alone as both Wiley and Barnes & Noble Education also reported a decline in unit sales in 2016. Further back in 2013, Cengage Learning, which was saddled with debt following the buyout by Apax Partners, also ran into trouble.

Virtually all leading players in the sector have taken to M&A to build digital offerings. McGraw-Hill Education is one of the best examples and whose acquisitions include that of UK based Busuu Limited. In 2015 the company reported that its digital products, namely learning platforms ALEKS, Connect and LearnSmart, sold more units than its paperback division. Equally, Cengage Learning, which emerged out of bankruptcy in 2014, has repositioned itself as a digital learning solutions provider and has acquired WebAssign, Pathbrite and Learning Objects. Other deals include Barnes & Noble Education’s purchase of digital platform and analytics provider LoudCloud Systems and in the highly regulated Netherlands market, Noordhoff Uitgevers acquired DigiTaalbedrijf.

 

Notable deals in this area:

 

Gattaca Plc, the listed UK-based engineering recruitment firm, has acquired a 70% stake in Resourcing Solutions Limited, the UK-based provider of recruitment solutions to engineering and construction company.

HGGC, LLC, the US-based middle market private equity firm, has acquired an undisclosed majority stake in Davies Group Limited, the UK-based company engaged in claims management and loss adjusting services.

Redrow Plc, the listed UK-based developer of residential and commercial property, has agreed to acquire Radleigh Group Limited, the UK-based company engaged in construction of domestic buildings, from Ark Capital Limited.

DWF LLP, the UK-based law firm, has acquired Triton Global Ltd., the UK-based provider of multi-disciplinary, commercial claims adjustment and management services.

IDP Education Limited has agreed to acquire Hotcourses Limited. IDP Education Limited is a listed Australia-based provider of educational services, headquartered in Melbourne. Hotcourses Limited is the UK-based online search portal for educational courses, headquartered in London.

Marston Group Limited, the UK-based judicial services company that provides integrated court order compliance services, and a portfolio company of Intermediate Capital Group Plc, has acquired NSL Limited, the UK-based provider of outsourced services to health, local government, central and regional government, and private sectors.

Places for People Group Limited, the UK-based property management, development and regeneration company, has acquired, Derwent Housing Association Limited, the UK-based company provider of houses and apartments for sale, rent, student accommodations in towns and cities, for an undisclosed consideration.

HERAmbiente S.p.A., an Italy-based provider of waste treatment and disposal services, and a subsidiary of HERA SpA, a listed Italy-based group engaged in energy, water and environmental utility services, has agreed to acquire Aliplast SpA, an Italy-based company engaged in collection, storage, handling, removal, differentiation, regeneration/recycling, and re-use of plastic.

AKKA Technologies SA, the listed France-based technology consulting and engineering company, has acquired Edelway AG, the Switzerland-based Switzerland-based provider of IT/Business professional consultancy services.

Paragon Partners GmbH, a Germany-based private equity firm has acquired a majority stake in Novagraaf BV, the Netherlands-based intellectual property consulting group, from Gilde Buy Out Partners BV.

Atalian CZ S.R.O., a Czech Republic-based provider of facilities management and industrial cleaning services and a subsidiary of Atalian Global Services, has agreed to acquire AB Facility a.s., a Czech Republic-based provider of facility management services, from Penta Investments Limited.

Accenture Plc, the listed Ireland-based management consulting, technology and outsourcing company, has acquired solid-serVision.com GmbH, the Germany-based company that provides service management solutions.