Wednesday, July 6, 2011

Acquisitions and other Financial Market Hoopla

Private Equity has long been either friend or foe to the public education market businesses that have paid steep premiums in order to gain talent, access and assets in the exponentially growing, worldwide eLearning market. As we’ve experienced in the past, financial market overzealousness and financially opportunistic mindsets often supplant the motivation for how technology innovation can change the efficiency, effectiveness and outcomes of public education. Assuming the Providence Equity transaction is completed, the real question is how educators’ best interests are served in seeking a balance between the formidable cost structure of running a proprietary software business and toward an end result of advancing eLearning in ways that address persistent challenges in public education.

Among all the noise, one thing is for certain; Providence Equity’s motivation reinforces the importance of the continued growth in eLearning and Learning Management Systems as an effective means for teaching and learning. The private equity market trends in investing in eLearning indeed track the demand side data for the explosive growth of technology applications in K-20 education. The current mindset of the industry is reinforced by the recent EDUCAUSE Top Ten IT Issues, 2011 report, where Teaching and Learning with Technology has consistently moved up in importance for the last several years across all institution types. At Moodlerooms, we witness this every day with the exponential growth occurring in the open source environment. With over 44 million Moodle users globally, an annual increase of over 25%, this type of financial market activity galvanizes the impact the open source movement has had in virtually all sectors of public and private education.

Throughout my career, I have been a staunch supporter of private equity investment in education. I applaud those forward thinking, sometimes visionary firms who have managed to strike a balance between the emphasis on “patient capital”, and the strong motivation for serving the best interests of technology innovation in education. Private equity can indeed be a strong ally in public education to the extent that the financial over-engineering and the drive for earnings does not jeopardize long term value creation for institutions, which is often the original, but overlooked intent in financial transactions.

- Lou