The NYTimes reported on 6/23 that Providence Equity is close to a deal to acquire Blackboard (market capitalization about $1.4 billion).
First, I think that this deal makes sense for Providence Equity. I believe that the value of Blackboard could significantly grow in the next 5 years. Further, I think that a buyout firm may be positioned to make the necessary investments over the next 5 years to position Blackboard for a sale to the large software, media or publishing company where I think Blackboard will eventually land.
For Providence Equity to grow the value of Blackboard to the point where Microsoft, Google, Oracle, Pearson, Amazon, (name your information company) would pay top dollar for Blackboard (think Microsoft's recent $8.5 billion acquisition of Skype), I think the following steps must be taken:
1. Integrate the Existing Pieces: We still think of Blackboard as a provider of enterprise learning management software, licensed on an annual basis (at least I do). Blackboard has almost all the the pieces, however, to evolve into a full-fledged and integrated educational services company. The acquisitions that Chasen has pushed through have all been smart. Blackboard Collaborate created out of Elluminate and Wimba. Blackboard Mobile from TerriblyClever. Blackboard Analytics from iStrategy. Blackboard Student Services from Presidium. Blackboard Connect from NTI and Saf-T-Net. And of course, Blackboard Learn from Angel, WebCT and internal growth. The degree to which these products can add up to an integrated and flexible service offering, with potential savings from integrated development, management and back office operations, and potentially lower customer acquisition costs (non duplicated sales staff and marketing etc), will drive short-to-medium term profitability.
2. Retain Talent: No one person is ever indispensable, but I think Ray Henderson comes awfully close. Ray has recruited a very talented team around him in the teaching and learning division, he has strong credibility in the academic and publishing communities, and is the type of leader who can move culture. If I were paying $1.5 billion for Blackboard I'd want to make sure that Ray is properly incented to stay, and that he has the resources, autonomy and breathing space to transition Blackboard from a provider of EDU products to a provider of EDU services. (Note: If Steve Ballmer were really smart, he'd do what it took to bring Henderson to Microsoft to build a meaningful education business - same goes for all the potential future buyers of Blackboard).
3. Fill Out Some Missing Pieces: The most obvious missing pieces to the Blackboard Educational Services company are media management (Kaltura, ShareStream, Ensemble), rapid authoring, content creation, editing and publishing tools (TechSmith), and lecture capture (Echo360, Panopto, MediaSite). I'm also wondering if a SaaS (software as a service) Student Information System (SIS) might be worthwhile to investigate.
4. Invest in Mobile and Analytics Divisions: Mobile and analytics are where I see the growth occurring. Both of these businesses will require large investments, and longer term time horizons, before they begin generating significant profits. Both mobile and analytics, however, are key -as they underlie (analytics) and touch on (mobile) the future shape of any integrated ed tech ecosystem. Payers will be required, by mandate and simple best practices, to make data informed decisions around ed tech investments and strategies. The future of technology enabled education belongs to the mobile form factor - particularly throughout the world's emerging economies.
5. Focus on the Global Market: I remain skeptical that the tomorrow's postsecondary providers, who will mostly come from the emerging economies of Asia, South America, and Africa, will be looking for turn-key educational solutions. Curriculum is local, and good teaching still requires teachers to create their own courses and course content. Therefore, I don't think that Blackboard should get into the educational publishing business, or become a direct supplier of e-learning. Rather, I think the global strategy they should follow is that of providing integrated educational platforms that can rapidly scale. In 2025 the world will find itself with many many more people involved in higher education, with very few of these new students consuming this education at a campus. As worldwide higher education expands, it will also unbundle, and the delivery method will be the Web, the laptop, the tablet, and most of all the smart phone.
What advice would you give Providence Equity?
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