Blackboard Flirts with Buying Pearson’s PowerSchool

Mergers and Acquisitions

Blackboard Flirts with Buying Pearson’s PowerSchool

By Tony Wan     Feb 12, 2015

Blackboard Flirts with Buying Pearson’s PowerSchool

Blackboard has been on an acquisitions roll ever since CEO Jay Bhatt took over in 2012 and decided to go all-in to overhaul its product, brand and strategy. But the Washington, DC-based company may be about to make its biggest bet yet.

Sources say the Washington, DC-based company is in final talks to purchase PowerSchool, a popular student information system (SIS) that serves more than 13 million students in the US and 65 other countries, from Pearson.

If confirmed, the deal will signal Blackboard’s seriousness about expanding into the K-12 market, one of last remaining frontiers for providers of learning management systems (LMS). Over the years, Blackboard has been steadily losing LMS market share among higher-ed institutions.

It will also affirm Bhatt’s promise, made during Blackboard’s annual user conference in July 2014, of an “avalanche of acquisitions in the pipeline.” Since January 2014, the company has snapped up eight companies, two of which--Schoolwires, ParentLink--serve millions of K-12 students and parents.

“K-12 is absolutely a focus for us,” Bhatt told Washington Business Journal this year. “You can see that in the verticalization of our marketing efforts, and in our technology investments within the company.” Blackboard currently serves around 1,700 school districts.

A sale would also mark the third major change of ownership for PowerSchool. The student information system was developed by PowerSchool Inc. in 1997 and deployed in 2,000 schools before it was acquired by Apple for $62 million in 2001. It was then sold to Pearson on May 25, 2006. (Within a week, Pearson acquired another school information system, Chancery, from developers in British Columbia. It then continued a fierce march of education-related acquisitions.)

Selling one of its major cash cows would be the latest in a series of big moves for Pearson, which is coming out of a costly organization restructuring led by CEO John Fallon. The company’s stock is back up (closing on Wednesday at 1,372 GB pence) after a steep plunge a year ago, hitting a 52-week low below 1,000 GBp in early 2014. Fallon recently told Bloomberg the company “enter[s] 2015 a simpler, leaner, more cash generative business.”

Slimming down could explain why Pearson may be letting go of PowerSchool. Even though it’s the most-widely used SIS in the US, the tool has also been troubled. Last year’s implementation of the system in North Carolina, for instance, was described as “a train wreck.” (North Carolina pays Pearson about $7.1 million per year for PowerSchool.)

Blackboard is one of Pearson’s “Independent Software Vendor” partners. In February 2014 the two companies announced a collaboration that allows data to be passed between PowerSchool and Blackboard Connect, a mass notification tool.

But the deal will raise questions over how other third-party PowerSchool partners will be affected, especially LMS providers including Schoology, School Loop and Naiku, which compete with Blackboard. There are more than 100 tools created by other developers that currently work with PowerSchool.

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