The journey is finally over for PowerSchool, the widely-used student information system that Pearson has been shopping around since February 2015. Blackboard was rumored to be the buyer when we first broke the news, but now a deal is close: Vista Equity Partners, a private equity firm, has agreed to fork out $350 million in cash.
This is the third change of hands for PowerSchool, which was first developed in 1997 before being sold to Apple in 2001 and Pearson in 2006.
For Bryan MacDonald, who counts himself as one of PowerSchool’s first 30 employees when he joined in January 2000, this deal feels like a breath of fresh air—and a return to the days when PowerSchools was an independent entity.
“There’s a huge amount of excitement among the team,” the current managing director for Pearson’s School Systems division tells EdSurge. “You have a group who loves SIS and is excited about being able to go back and focus on growth.”
Even though PowerSchool was a profitable business for Pearson—generating $97 million in revenues and $20 million in operating income in 2014—“it became clear that it was going to be difficult for Pearson to continue investing in our business when they could be investing in things that are better aligned to their new mission,” says MacDonald. “Pearson has been a big supporters of ours, but we were not a priority for their aggressive growth plans.”
Under CEO John Fallon, who took the reins in 2013, Pearson has been beating the drum around the idea of efficacy to prove that its vast portfolio of tools can positively impact student outcomes. In a statement prepared for this deal, he said:
“The sale of PowerSchool, an administrative system rather than a tool for learning, teaching or assessment, will enable us to focus more directly on learning outcomes, and further simplify Pearson as we make our products more global, digital and scalable.”
With Vista Equity Partners, MacDonald sees a buyer that “is committed to growing the product” and, perhaps more importantly, “not interested in cutting costs, pumping profitability, and flipping it.” The private equity firm’s current portfolio includes a couple of technology companies serving the higher education market.
Under the new ownership, MacDonald believes his team will have more leeway and resources to grow its footprint in the fragmented K-12 student information system market. Although PowerSchool is the market leader, supporting 15 million students, there are dozens of smaller companies that serve individual states and districts. (Here’s an excellent analysis of the SIS market from a former PowerSchool employee.)
“Like every market out there, the SIS market will consolidate around a couple of major players,” MacDonald predicts. “The SIS is so mission critical, and because the switching costs—not just dollars, but in terms of change management and training—are so steep, a lot of the districts have hung on to local or single-state players whose technologies are out of date.”
He adds: “The customers who are on older platforms will eventually move on. They are realizing that they are getting left behind and not getting technology and state reporting updates.”
In a FAQ about the sale, Pearson School Systems marketing director, Terri Zezula affirmed to PowerSchool’s 4,200 customers that it'll be "business as usual," with "no plans to make changes to [its] existing staff" of approximately 440 employees who will transfer to Vista Equity Partners. “The PowerSchool team will continue to support implementations and provide implementation services under contract,” she wrote.
The deal is expected to close during fall 2015, after which MacDonald wants to “grow aggressively,” starting with a hiring spree for support roles like accounting and legal services that Pearson has provided.
