Blackboard knows it has an image problem. Though it started out as an innovator — helping invent course-management systems — its core products have become a Frankenstein-like creation of acquired companies and legacy software. That’s why, just last week, Blackboard announced at its annual conference that it was significantly retooling its products.
Even so, Blackboard is reportedly seeking a buyer willing to pay up to $3.4 billion, according to a report on Tuesday by Reuters, and experts say that at a time when investment in education technology is at an all-time high, it might just get that price.
Exactly what a sale would mean for colleges — and for the professors and students who regularly use Blackboard software to turn in assignments, hold online class discussions, and the like — depends on who buys the company. But with that kind of price tag, the list of potential buyers is pretty short, say some who watch the education-technology market.
Before running through potential scenarios, it’s worth noting that Blackboard has not confirmed the report that its majority owner, Providence Equity Partners LLC, has hired outside banks to run an auction of the company, as sources told Reuters. But the company did nothing to deny the report, either. Here is the statement Blackboard provided:
Blackboard, like many successful players in the technology industry, has become subject of sale rumors. Although we are transparent in our communications about the Blackboard business and direction when appropriate, it is our policy not to comment on rumors or speculation. Blackboard is in an exciting industry that is generating substantial investor interest. Coming off a very successful BbWorld 2015 and a significant amount of positive customer and market momentum, potential investor interest in our company is not surprising.
Jeff Alderson, principal analyst at Eduventures, said the statement sounded as if Blackboard was trying “to stoke this as much as you can because you want the money.”
Mr. Alderson predicted, though, that there would hardly be a bidding war for the company, which is losing some customers to newer players such as Instructure. But he said that because Blackboard had reported strong sales in overseas markets and is working to streamline its operations and update its products, it might command something like a $3-billion-plus valuation.
Who might buy it?
Mr. Alderson guessed it could be a major textbook company like Pearson, which just sold the Financial Times for $1.3 billion, and so has the wherewithal to be a serious bidder for Blackboard. Or he said it could be a major technology provider such as Oracle, or a private-equity firm that saw an opportunity for further growth.
Blackboard was last purchased by Providence Equity Partners, in 2011, for $1.64 billion. If another private-equity firm did buy it, that might result in little change in the company’s products, since the firm would essentially be betting that the current turnaround attempt will work.
Trace Urdan, an independent analyst, said that companies that help colleges build online programs, such as 2U, could also be interested in buying Blackboard. “It could jump-start an emerging platform,” he said.
‘Lipstick on a Pig’?
Phil Hill, an education-technology consultant and co-author of the e-Literate blog, said that it’s common practice for firms like Providence Equity Partners to buy a company, work to make it more efficient, and then sell it three to seven years later at a profit. He said that if Blackboard’s reported profits were accurate, it might just be worth the $3-billion-plus price to the right investor.
But he added that the company’s long-term prospects depended on the retooling it announced last week, which he called “some of the most significant re-architecture and design work that I’ve seen in this industry.”
“This is not at all putting lipstick on a pig,” he added, asserting that past relaunches by the company had turned out to be just that. “It’s a big bet that might or might not pay off.”
He speculated that the timing of the attempted sale had been designed to tap into unprecedented investor interest in education-technology companies. He cited the recent purchase of Lynda.com by LinkedIn for $1.5 billion. “The market’s hot right now,” he said.
David Parry, an associate professor of communications and digital media at Saint Joseph’s University, in Philadelphia, said that while Blackboard used to feel like the only game in town, “the landscape has changed” because of new players that have been quicker to adapt to trends in teaching and technology.
“If there ends up being a major shake-up of Blackboard, even if it doesn’t feel like one to the end user,” he said, “I think you could see people re-evaluate whether they want to stick with Blackboard.”
Mr. Parry noted that he was skeptical at first of the reported $3-billion-plus price for the company. “Then I thought of all the data they own,” he said. “If you look at the app permissions, they’re basically allowed to take anything.”
But Mr. Alderson, of Eduventures, said that Blackboard had less data than people may realize, precisely because professors and administrators have been reluctant to hand over such data to an outside technology company.
“It’s impossible to have that on the balance sheet as an asset to possibly monetize,” he said. “Faculty and staff are paranoid that a vendor is going to use their data in an unwanted way.”
Jeffrey R. Young writes about technology in education and leads a team exploring new story formats. Follow him on Twitter @jryoung; check out his home page, jeffyoung.net; or try him by email at jeff.young@chronicle.com.
