Substitute teaching services, student information system, and parent-teacher conference scheduling software. A district in Delaware is seeking a substitute teaching services, while a district in Minnesota is soliciting bids for a K-12 student information system. Further, a district in Utah is looking to purchase parent-teacher conference scheduling software.
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The total value of mergers and acquisitions in the education industry grew by more than 50 percent from the second half of 2020 to the first half of this year, as companies across the market rushed to add to their portfolios, according to a report by investment banking firm Berkery Noyes.
The overall number of individual M&A transactions also rebounded to pre-pandemic levels.
Education companies closed 240 acquisitions in the first six months of 2021, up from 222 deals in the second half of 2020, and 210 mergers in the first half of last year. There were 238 acquisitions in the education industry in the second half of 2019.
The total value of education acquisitions from January through June was $19.4 billion, largely driven by Platinum Equity’s $6.4-billion acquisition of McGraw Hill, the report noted.
Deals made during this period had nearly as much value as mergers and acquisitions for the full year of 2020, when they totaled $21.4 billion.
The investment group, which provides advice and financial consulting to middle-market companies in the technology and information sectors, tracked 1,152 education deals between 2019 and June 2021.
Private equity financed 40 percent of acquisitions during the first half of this year, 8 percent higher than the 2019-2021 overall average.
According to Berkery Noyes, 97 of the 240 deals during this time frame were financed by private equity, venture capital, or some other investment firm, the most in at least three years and a 131 percent increase over the first half of 2020.
Twelve deals in the first half of this year carried values of more than $100 million, and at least seven of those involved the K-12 sector. About one-third of the total transactions had values between $4.5 million and $54.6 million.
K-12 media and tech surpassed professional training services as the education industry’s most active market segment year-to-date.
There were about 50 acquisitions that involved professional training services and roughly 40 deals that involved K-12 media and tech in the second half of last year, while nearly 60 deals touched K-12 media and tech and about 45 deals covered professional training services in the first half of 2021.
The report showed a mixed picture for market activity in various segments for the first six months of this year compared with the second half of 2020.
The rate of deals in the childcare services and higher-ed media and tech spaces increased during this span, but the number of deals in professional training technology, higher-ed institutions, and K-20 services fell. Deals involving K-12 institutions remained stable.
Pre-K-12 instructional materials are just one slice of a publishing industry that broadly thrived over the past year.
Data released last week by the Association of American Publishers show that sales of educational instructional materials in March more than doubled, year over year.
Overall educational revenues for instructional materials climbed by $111.7 million, while revenues for pre-K-12 resources reached $61.4 million in March — an 82 percent jump over a year ago.
Sales of higher education course materials rose even more sharply, reaching $50.4 million in March, a 179 percent increase over the previous year.
Education publishers’ gains over the past year have come at a time when public and private investment in education markets has soared. Federal lawmakers have approved three different stimulus measures, the most recent of which will channel $130 million into K-12 education. Venture capitalists poured $16.1 billion total into ed tech in 2020, $7.9 billion more than the previous record set in 2018.
One factor driving the increases in education publishers’ revenues: Two of the three largest state markets for vendors in terms of student population – Texas and Florida – purchased significantly more instructional materials this March than a year ago, according to AAP’s PreK-12 Books & Materials Monthly Report for March 2021.
Florida and Texas K-12 leaders bought $8.5 million and $2.3 million worth of pedagogical materials, respectively, showing increases of 331 percent and 137 percent over March 2020.
On the other hand, sales of instructional materials in California, the state with the largest K-12 population, dropped from $6.1 million to $3.9 million.
In addition to higher monthly sales, Florida also generated a sizable increase in revenues for instructional materials across the full years of 2019 and 2020, growing from $6.9 million to $11.4 million. During the same period, annual sales for California fell from $12.1 million to $10.1 million, and yearly sales for Texas declined from $7.8 million to $7.2 million.
The educational sales data account for materials covering reading and language arts, science, social studies, math, English as a second language, career and technical education, as well as miscellaneous other subject areas.
Other segments of the publishing industry have also seen their revenues increase over the past year. Consumer books grossed $743.9 million in March, a 34.2-percent increase year-over-year, while professional books generated $33.1 million, a 33.2-percent gain.
AAP released the information based on questionnaires they sent to publishers, the group said. The monthly reports draw revenue data from approximately 1,300 publishers.
Publishing sales for this year are more comparable to 2017-2019 levels than to industry revenues last year, which was a “tough” time for the industry, AAP said.
Though the publishing industry posted striking growth rates in March, the industry typically sees stronger performance over the summer, and so the next few months will provide a better indicator of the sector’s resilience, according to the AAP.
The number of published solicitations in K-12 declined sharply in 2020 — dropping to the lowest in almost a decade — but the education sector is poised to return to pre-pandemic levels for RFPs faster than many other government markets that buy products and services,according to GovWin from Deltek.
Last year’s dip in solicitations was due primarily to a tectonic shift in school district spending and purchasing priorities as a result of COVID-19 and the mass move to remote learning.
Districts typically rely on RFPs and bids as part of the procurement process, but in many cases last year did not want to wait through the long process involved with those traditional purchasing vehicles. School systems also relied on sole-source (non-competitive) procurements or turned to cooperatives last year to purchase goods and services quickly, according to GovWin from Deltek, which tracks published solicitations.
The report, which analyzed RFPs and bids from all public school districts with an enrollment of more than 500 students, says that K-12 solicitation volume is expected to grow by 13 percent this year and then almost another 5 percent in 2022 as spending and purchasing conditions normalize further.
“Education overall is one of the markets that’s going to rebound most effectively through the next two years,” saidMorgan Parkin, a research analyst for GovWin at Deltek.
That rebound, said Parkin, has already started, fueled in part by several rounds of federal emergency dollars.
She is forecasting that soft demand in a broad swath of K-12 spending categories should begin to reverse, and vendors could “start to notice those changes as early as now.” At the same time, solicitations for some “high priority purchases” have remained strong in recent months, according to the report.
Two big areas Parkinsaid she’s noticing an uptick for published solicitations is STEM curriculum and career-technical education programs.
She also expects to see an increase in school districts issuing bids for assessment programs. Moving forward, districts could be issuing solicitations for a broader mix of assessment tools “coming from all types of vendors, large and small,” to better understand achievement gaps caused by the pandemic,” according to the report.
“A major contract might get split up into smaller ones so more vendors can get in on it,” Parkin said, noting that districts might be less willing to sign with a big assessment provider for multiple years. “There’s going to be more work in assessments, but it will look a little different going in 2021 and 2022.”
Demand should also stay steady for digital textbooks, small-scale remote learning tools, and computer equipment — all tools needed in case of another move back to distance learning.
Rising Interest in PD, and Consulting
The report notes that vendors should “continue to watch for opportunities across all aspects of education, as this market involves a vast amount of services, supplies, systems, software, construction and maintenance. “ Districts not only have more money at their disposal now than at some points in 2020, as a result of a new federal stimulus, but more time and increased flexibility in how they use those funds.
“Spending has returned already at the start of 2021,” Parkin said.
Bids and RFPs issued by independent school districts rose from about 45,000 in 2014 up to 53,864 in 2019, for a compounded annual growth rate of 3.6 percent.
In 2020, the total was 43,903, which was the lowest since 2012, according to data from GovWin from Deltek.
GovWin from Deltek provides business customers with market intelligence and leads on federal, state, local, and education government contracting. A recent analysis by the organization of contracting in the K-12 and higher education markets can be found here. (EdWeek Market Brief partners with GovWin from Deltek’s searches as a source for Purchasing Alerts, our twice-weekly breakdowns of education-focused RFPs from around the country.)
Through 2020, schools showed a strong interest in procuring supplies and safety products. But as the year progressed, so did district needs, as more schools issued bids for COVID testing services and there was a stronger focus on consulting and professional development, according toGovWin fromDeltek.
Parkin said she expects the trend from 2020 of districts using cooperative purchasing to continue, but that school systems will likely rely on sole-source procurements with less frequency since they have more money and are no longer facing do-or-die timelines for purchases.
Also, Parkin anticipates that a trend in districts making more contract opportunities available to minority and women-owned businesses will continue.
And she has a message for vendors: Virtual sales pitches and demonstrations are still in demand, based on RFPs in 2021 that Parkin has analyzed, even as the pandemic subsides.
“Schools will be more willing to entertain the option of a virtual presentation,” she said. “I’ve seen more bids and RFPs that list it as an option, so that won’t be gone completely even as the world returns to normal in terms of spending.”
The Biden administration’s recent guidance for how states should carry out federally mandated tests is likely to have implications for the testing industry, potentially affecting everything from the work required to design the exams to scheduling them to companies’ bottom lines.
In a letter to states, the U.S. Department of Education this week informed states that they won’t be allowed to cancel federally mandated standardized exams this school year — unlike last spring, when they were given the right to shelve end-of-year exams.
But the agency gave states the right to propose shortened versions of state exams in English/language arts, math, and science, and is allowing them to delay the assessments, potentially even until next school year.
Typically, test scoring is done over a three-week time period, but a longer testing window increases the chances that the process becomes less efficient, which could raise test providers’ costs, said Barry Topol, managing partner of Assessment Solutions Group. His organization provides assessment cost, management and state accountability systems analysis and consulting to states and other entities.
“The big costs of scoring are the variable costs of monitoring those [test] raters and readers, and training them and having them score,” he said in an interview with EdWeek Market Brief.
Though the department’s letter to states said it won’t invite state requests for blanket waivers of assessments akin to the broad waivers issued by the department last spring, the agency did say it will allow states to seek waivers from federal requirements for school accountability, which would include a waiver from the requirement that states test 95 percent of eligible students, as my Education Week colleagues reported Monday.
And despite the department’s decision to not invite applications for broad assessment waivers, states could still seek them.
For instance, Pennsylvania state lawmakers on Wednesday asked the Biden administration to waive assessment requirements this year because of the pandemic.
Reworking State Contracts
If states take advantage of the administration’s permission to delay this year’s assessments, that could increase logistical and hiring costs for assessment providers.
Asked whether longer testing windows would make it more difficult to efficiently hire test scorers for this cycle, Cambium Assessment President Steve Kromer said the scenario is one that the company can adapt to meet. Scorers are generally receptive, he said, to offers to extend their contracts if necessary.
Cambium Assessment currently has 27 different contracts with states for summative types of assessments, and provides mostly computer-based tests, he said.
As there were last year, there could be contract renegotiations between Cambium and its customers as these states explore the possibilities of delaying or modifying aspects of this year’s tests, Kromer said.
“We would need to understand what the impact of a change would be, in terms of how we adjust our capacity based on our anticipated volumes of helpdesk calls and volumes of computer-based tests,” Kromer said. “We’re going to — as any business — look at adjustments to our capacity.”
If assessment providers are administering tests remotely, an extended test window could place additional cost burdens by requiring extensions of leases for test facilities and computers, Topol said.
On the other hand, if states desire shorter assessments, it could challenge companies to quickly compress the length of these exams while still ensuring the tests are still robust, Topol said.
“One way to do it would be to eliminate those constructed response items, but then you’ve got some issues with are you providing adequate content coverage?” he said. “The later in the school year… that you do that, the faster the vendors have to respond, the more expensive it is, and the more you introduce more chances for human error somewhere in the process.”
Cambium Assessment’s revenue took a hit when standardized tests were canceled last year. The company could sustain some revenue impacts this cycle as well, potentially associated with longer testing windows and modifying test structures, Kromer said.
But other costs could fall, Kromer said.
“You may not have to pay the cost to have [physical test books] taken to one of the states and have all those test books delivered and pick them back up,” he said. “There are costs that would go away.”
School management software, curriculum consulting, special education services. A charter school in Texas is looking for a school management platform; a major Maryland district has put out an RFP for wraparound services to support special needs students; and the city of Philadelphia is looking for a curriculum consultant focused on environmental science.
Active/upcoming solicitations for goods/services
Arrow Academy Charter School, Texas
Focus: School management software Students: 1,000 Deadline:Dec. 10, 2020 The plan: This charter school, which operates on four campuses in Bryan, Texas, is looking for a software system that includes a student information system, a business information system, and a human resources management system. The district is also interested in other functions, including website content management, and a parent communication platform. Questions should be submitted to Bradley Green at Bradley.firstname.lastname@example.org.
Montgomery County School District, Md.
Focus: Wraparound services/special needs students Students: 161,000 Deadline: Dec. 16, 2020 The plan: This major suburban school district is looking for wraparound educational services for students with special needs if a public or private school cannot be found to serve them. The support provided to students through the program can be academic, social or behavioral. Depending on the student’s needs, these services can include direct educational services, tutoring, counseling, medical care, transportation, transitional services, and other services. Questions should be directed to email@example.com.
City of Philadelp3h2ia
Focus: Curriculum consulting Students: Deadline: Dec. 23, 2020 The plan: The city of Philadelphia is looking for a consultant to align standards and embed environmental science standards in middle school curriculum for grades 6-8. The consultant is asked to facilitate curriculum design, development, and implementation for an introduction to environmental science unit for 9th grade and guide the strategic plan for expanding and implementing watershed curriculum in the elementary grades. The consultant must be proficient in curriculum planning, design, decision-making, writing and editing. Questions can be directed to Karen Young, at firstname.lastname@example.org.
EdWeek Market Brief was assisted in gathering this information by BidNet, which uses proprietary technology to track buying at all levels of government across the United States and deliver tailored information to clients; and by GovWin from Deltek, which provides enterprise, mid-market, and small business customers with a comprehensive set of federal, state, local, and education government contracting market intelligence and leads.
For more information on BidNet’s services, visit www.bidnet.com, or call 1-800-677-1997. For more information about GovWin from Deltek, visit www.deltek.com/govwin, or call (888) 994-6788.
Individual RFPs and awards summarized in EdWeek Market Brief can change, so readers are encouraged to contact BidNet and GovWin from Deltek or the buyer directly.
Learning management system, student information system, mentoring services. The Fort Worth district is seeking mentoring services, while a district in Utah is searching for a student information system. Meanwhile, the Tolleson Union High School District in Arizona wants a learning management system.