In Less than one month after announcing an investment by the newly-formed Google Capital that valued it at $1 billion, education tech company Renaissance Learning has been acquired by a new private equity owner, Hellman & Friedman, for $1.1 billion.
The company, which claims to bring its cloud-based lesson plan analytics to one out of three schools in the United States, had been originally acquired by funds managed by another firm, Permira, for $455 million in October of 2011, who will see a 2x return on their investment in less than three years should the deal close in Q2 of 2014 as expected. Renaissance will remain headquartered in Wisconsin Rapids, Wisconsin. Google Capital is expected to remain an investor, the company said in a release.
Renaissance Learning bills itself as a company that scans the data it gets from its over 30,000 participating schools to improve teachers’ lesson plans and how they track their students’ performance, primarily in math and reading. The company says it handles 45 million online assessments of student progress each year, helping it to build out “learning progressions” that can track students’ comprehension of new technology and state standards over time.
But most recently, Renaissance was in headlines for its new ties to Google Capital, the new growth equity fund launched by the technology giant. The company was announced as just the third of that fund’s public investments last month, following announcements for two high profile technology companies, SurveyMonkey and Lending Club. Google Capital has since put about $40 million into credit manager Credit Karma and $50 million into property broker Auctions.com. That leaves the fund a little over $170 million left of the reported $300 million the fund will target to invest in 2014.
At the time of the Google Capital deal, Renaissance CEO Jack Lynch hinted to reporters that the deal would create strategic partnership opportunities for Renaissance, “opening the door.” But fresh off a June acquisition of a classroom e-reader, Subtext, Renaissance also appears to have been saddled with debt that could have made it receptive to taking on a shot in the arm of cash. The company had announced last September that it planned to take out several hundred million dollars in loans, in part to pay a $234 million dividend back to its Permira fund ownership and also to refinance existing debt. That proposal had changed Moody’s outlook on Renaissance from “stable” to “negative.”
The Google Capital deal was struck directly with Renaissance and also validated the company’s growth in value since its earlier sale. In a separate sequence of deal-making, Permira apparently decided to cash in further and secure a 2x return, finalizing the deal with growth-focused Hellman & Friedman on Monday night.
The company will hope that this acquisition goes more smoothly than when Permira took over in the first place. Then, its eventual $455 million winning bid was actually outbid by a rival investment group. Founders Judi and Terry Paul the rival bids that had valued Renaissance at about $500 million and sold to Permira, citing its commitment to the Wisconsin Rapids community. Permira’s own acquisition of Renaissance has been challenged in the courts in appeals proceedings as recently as last month.
Renaissance says its leadership is expected to remain in place after the sale closes, though the company also left the door open to possible budget-slashing and future layoffs down the road as Hellman & Friedman puts its own growth model for the company into effect. The company will release new products this year, including a new version of Subtext, a Google Ventures (Google’s early stage investment vehicle) backed startup the company acquired last June.
Renaissance Learning had originally gone public in 1997. It earned just under $24 million in net income off revenue of $130 million in its last year public. The company reportedly had revenue growth of 20% year-to-year last year, although its difference from 2010 is unclear.
Hellman & Friedman manages $25 billion in assets, while Permira, a largely European firm, has under $30 billion in assets under management.