PowerSchool, a leading provider of K-12 education software, is set to go private in a $5.6 billion deal with Bain Capital. This acquisition is part of a broader trend of private equity firms snapping up enterprise software companies at attractive valuations.
Founded in 1997, PowerSchool began as a student information system provider, assisting schools with managing essential functions like enrollment, grades, attendance, and communication. In 2001, Apple acquired the company for $62 million in stock. This amount would be worth an impressive $26 billion today, given Apple’s current market value. However, Apple sold PowerSchool to Pearson in 2006.
Later, Vista Equity Partners took over in 2015, with Canadian private equity firm Onex Partners joining the investment in 2018. This partnership led to PowerSchool’s public listing on the NYSE in 2021, giving the company an initial valuation of around $3.5 billion.
During the pandemic, PowerSchool experienced the typical market fluctuations seen by many companies. Its valuation surged to $5.5 billion in late 2021, only to fall to $1.8 billion within a year. Recently, PowerSchool’s market value has stabilized around $3.5 billion.
Bain Capital’s bid of $22.80 per share in cash represents a 37 percent premium on PowerSchool’s May 7 share price of $16.64. This date marks when rumors first emerged about the potential acquisition. These rumors coincided with PowerSchool’s strong Q1 2024 earnings report, showing a 16% year-on-year revenue increase to $185 million. Analysts have also predicted that the company will reach profitability this year.
Private equity firms like Bain Capital see potential in companies like PowerSchool, aiming to help them grow away from the public market’s pressures. Bain Capital partner Max de Groen expressed confidence in expanding access to PowerSchool’s top-tier product suite globally, citing the growing demand for K-12 educational technology.
This acquisition is part of a wave of similar deals in 2024. For instance, U.K. private equity firm Permira recently announced a $6.9 billion deal to take Squarespace private. Similarly, Thoma Bravo has been active, with a $5 billion acquisition of cybersecurity company Darktrace and a $1.8 billion deal for critical event management software company Everbridge. Additionally, Vista Equity Partners is set to take revenue optimization platform Model N private in a $1.25 billion deal.
Bain Capital plans to finalize the PowerSchool acquisition in the second half of 2024, pending regulatory and shareholder approvals. Once completed, PowerSchool will cease trading on the NYSE. However, existing investors Vista and Onex will retain minority stakes in the company. This strategic move underscores Bain Capital’s belief in PowerSchool’s potential to expand and innovate in the ever-evolving educational technology landscape.
