Cloud-based education software vendor PowerSchool is being taken private by investment firm Bain Capital in a $5.6 billion deal.
The acquisition is the latest in a swathe of take-private deals led by private equity firms seeking a bargain on underperforming enterprise software firms.
PowerSchool is a web-based platform that helps educational institutions manage operations such as enrolment, grades, attendance and communications with parents and students. Founded in 1997 as a student information system provider for schools, the company was acquired by Apple in 2001 for $62 million in Apple stock, a figure that would be worth around $26 billion today as Apple grew into a $3 trillion company.
Apple subsequently sold PowerSchool to Pearson five years later, which in turn sold it on to Vista Equity Partners in 2015, and Canadian private equity firm Onex Partners joined as investor three years later. The duo pushed PowerSchool into the public markets in 2021, with the NYSE listing giving the company an initial valuation of around $3.5 billion.
In the intervening years, PowerSchool went through the now-familiar pandemic-era peaks and troughs — it surged to a valuation of $5.5 billion in late 2021 before falling to $1.8 billion within a year. For the past couple of years it has hovered at around the $3.5 billion mark.
Bain Capital’s bid weighs in at $22.80 per share in cash, representing a 37% premium on PowerSchool’s May 7 closing share price of $16.64 — the date when rumors emerged that Bain Capital was eyeing an acquisition. These rumors also surfaced as PowerSchool reported strong Q1 2024 earnings, with revenues up 16% year-on-year to $185 million, and analysts predicting the company would reach profitability this year.
With take-private deals such as this, it’s all about spotting companies with potential and helping them reach that potential away from the pressures of the public markets. That is what Bain is doing here with its majority investment in PowerSchool.
“As demand for K-12 educational technology grows, we believe there are significant opportunities to expand access to PowerSchool’s best-in-class product suite around the world,” Bain Capital partner Max de Groen said in a statement.
There has been a spate of similar deals so far in 2024. Last month, U.K. private equity firm Permira revealed it was doling out $6.9 billion to take Squarespace private. Elsewhere, Thoma Bravo said it was taking cybersecurity company Darktrace private in a $5 billion deal and paying $1.8 billion for critical event management software company Everbridge. Revenue optimization platform Model N is also being taken private by Vista Equity Partners for $1.25 billion.
Bain Capital said it expects to close the PowerSchool acquisition in the second half of 2024, subject to the usual regulatory and shareholder approvals. Existing investors Vista and Onex will retain minority investments in PowerSchool once the deal concludes.
