Company summary

Pearson is the global leader in education, providing print and digital learning materials and services used by millions of students every year, principally in North America but also Europe, Asia and Latin America. The Company's education related revenues top $6.5bn. The Company also owns The Financial Times Group, which has an international network of business and financial newspapers and online services and Penguin Group, which is one of the pre-eminent names in consumer publishing.

16 October 2012 | Education

Company news

Pearson Acquires EmbanetCompass for $650m

Pearson, the world's leading learning company, has announced the acquisition of EmbanetCompass from an investor group led by Technology Crossover Ventures and Knowledge Universe, for $650m in cash.

​EmbanetCompass partners with leading non-profit colleges and universities in North America to provide fully online learning solutions for more than 100 university programmes. It provides a full range of services including: programme design and development, marketing and student recruitment, faculty training and support, data-driven student retention and learning analytics; student services (counselling, tutoring, mentoring), technology support and launch funding.

Institutional services are one of the fastest growing areas of the US higher education market. Out of 6,700 degree-granting institutions in the US, approximately 175 institutions engage third-party vendors to power online programmes. Of a total post-secondary student population of 22 million, 2.5 million participate in purely online programmes with over 6 million taking at least one online course. The Company believes the number of students learning online and the number of institutions serving those students will grow rapidly, as academic institutions seek low-risk and cost-effective ways to better serve new and existing customers by boosting student access, affordability, achievement and retention.

EmbanetCompass revenues have grown strongly in each of the last three years and are expected to be approximately $130m in 2012 (2011: $35m). Pearson expects the acquisition, which is subject to a Hart-Scott-Rodino review, to enhance adjusted earnings per share and to generate a return on invested capital above Pearson's weighted average cost of capital from 2014.

The acquisition builds on and broadens the Company's leading position in the fast-growing online educational services market established through our partnerships with institutions such as Arizona State University, California State University Online (CSU Online) and the community college systems in West Virginia, Kentucky, Tennessee, Iowa and Colorado. It also makes its content businesses more valuable and brings the opportunity to apply EmbanetCompass skills and technologies in new segments and geographic markets. Perason belives the acquisition extends its investment in education services and technologies that have both a direct connection with the learner and a strong record of enhancing student achievement helped by data analytics.

Will Ethridge, CEO of Pearson North America, said, "The acquisition of EmbanetCompass extends Pearson's investment in two areas where we see great opportunities for growth and impact-online education and educational services. The combination of Pearson and EmbanetCompass creates the premier provider of online learning and education services and will further enable us to advance the goals of the institutions and students we serve with innovative and proven programs."

EmbanetCompass was founded in 1995 and is located in Chicago, Orlando, and Toronto. It has 580 employees and is headed by Steve Fireng, who will stay on as CEO of EmbanetCompass and as a senior executive at Pearson.

"In the next five years, we expect nearly 4 million fully online learners will be in this market," said Steve Fireng. "By joining Pearson, the world's premier provider of educational content, programs, services and platforms, EmbanetCompass has a tremendous opportunity to strengthen our relationships with academic partners, expand programs and services at our current academic partners, and continue to expand into new exciting markets both domestically and around the globe."

Comment:

This deal demonstrates Pearson's continuing commitment to the education sector generally and online education in particular. The purchase price seems steep with the deal expected to only enhance earnings two years from now but EmbanetCompass is growing rapidly and the deal should give Pearson the opportunity to leverage its existing online offering. Questions will continue to be asked about the future of Pearson's Penguin and FT/data analytics businesses and whether they fit strategically.     

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Our expertise

Deal origination - acquisitions - We help quoted companies and private equity houses source acquisitions in the UK and overseas.

Deal origination - disposals - We help owners of companies wishing to dispose of their business.

IPO advice - We provide strategic, financial and valuation advice to companies considering an IPO.

Valuation - We undertake valuations for ESOP transactions, employee share schemes and for a wide range of fiscal, legal and commercial purposes.

Our sectors

Our corporate finance skills can be employed in a wide range of sectors. We have a particular strength in animal health, education, outsourcing, IT, data analytics and financial publishing.

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