Over the last couple of years we at Polestar have been speaking with many software providers to the education sector. One thing most of these have in common is their plan to build to an “optimum” size and then sell to or indeed become the consolidator.
In 2019 we arranged for the sale Double First, which owns Engage – one of the two leading English language private school MIS providers, to Australia’s Potentia-backed Education Horizon Group. This cleared regulatory hurdles and completed at the end of March 2020. Just six months later we now see the sale of Engage’s main competitor to iSAMS to another PE-backed business, Iris. This purchase is a very interesting move by IRIS who will doubtlessly be on SIMS tail, and a great exit for Alastair and Jamie.
Other recent deals include BGF and Octopus investing further funds in to Firefly and Horizon Capital supporting Juniper Education on a buy and build strategy.
All the parties we talk to are looking for acquisitions, and the prices being paid for proper SaaS businesses are based on annual recurring revenue (ARR) rather than EBITDA multiples. For the right business a price paid of 5x ARR is not out of the question.
I suspect that 2021 will bring about more consolidation as schools need to up their capacity for remote working and governors require ever greater support to demonstrate they are meeting their required standards.
With consolidation comes the opportunity for smaller players to secure funding. So if you are looking for capital or an exit please do get in touch, we know many of the industry players and certainly know who is paying what.
Domestically we are seeing a growing need for schools to not only move to a SaaS environment for finance, HR and payroll, but increase their engagement with parents, provide more detailed reporting and create more efficient, paperless administration system
