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Is Your Company Ready for M&A? Ask the Tough Questions Now!

Jacob Hanson
June 1, 2022

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To a nonexpert, the stock market may seem like it’s far from education. From the outside, they look like two different worlds. But the last few years have shown the domino effect among capital markets, mergers and acquisitions (“M&A”) in the edtech space, and schools.

A Few Predictions

Companies in the edtech market should prepare now for a shakeup to the spike in M&A activity that occurred during the pandemic. We’re going to see companies taking stock of the decisions they made and wanting to focus on more profitable investments. So now is the time to get your ducks in a row. Focus on your strategic core and have tough conversations with your internal network.

Before the pandemic, experts at Tucker Capital thought they’d see a pullback in M&A deals in the education market. Then the pandemic turned that on its head. It put edtech front and center. Suddenly, there was a lot of buying and a lot of money. It wasn’t actually the stimulus money per se that drove the flurry of activity in M&A. It was the overall capital markets and sense of optimism. During our conversation on The Education Insider Podcast, Taylor Smith, managing director of Tucker Capital, said that the pace of M&A is due for a change.

“It's going to slow down to some extent,” Smith said. “As we get into a fiscal cliff, the stimulus money and budget going toward K-12 will begin to slow down.”

Smith said that the market is seeing a little saturation now, and there’s going to be a strategic reckoning when the dust settles and companies take stock of the deals they’ve made. Some might realize they now have a bunch of assets that don’t fit together in a clearly strategic way. When that happens, there’s going to be a shift towards looking towards more profitable companies.

For both buyers and sellers, Smith noted, “Things start to adjust post-acquisition. To keep employees and maintain autonomy, lean into the hardest issues. Buyer and seller will want to see a fruitful outcome. It gets back to the style of approach in the process. If you’re not paying attention to issues that will rear their head down the line, employees might leave.”

What you Can Do to Prepare

To foolproof yourself for a future merger or acquisition, focus on these three things:

  1. Your strategic core;
  2. Cultural alignment; and
  3. The story you’re telling.

Things change over the course of a deal. Companies often start out with different interests than they end with. You need to know how people are going to behave when things get dicey. Do your homework on cultural fit and who you’re aligning with. Before moving forward with any M&A activity, talk to your internal network about a possible exit. When it comes time to meet with a potential partner, know who you are and ask them more questions than they ask you. 

In the end, it all comes back to the story you’re building and telling to the market. Your story should pay homage to the strategic decisions you’ve made. 

To listen to the full conversation, visit the link below or visit The Education Insider Podcast with PRP wherever you listen to podcasts. 

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