EdTech Summer Report 2024

EDTECH SEMI-ANNUAL REPORT

Summer 2024

Index

Macroeconomic Outlook

EdTech Industry Overview

EdTech Subsector Breakdown

EdTech M&A Activity

EdTech Transactions

Looking Ahead

Case Studies

Behind this Report

About FE International

Macroeconomic Overview

The global economy is expected to settle into a pattern of "steady" growth. Despite recent challenges such as high interest rates, inflation, and geopolitical tensions, the 3.2% growth rate for 2024 and 2025 indicates resilience as we settle into a new normal after the pandemic. The economic pick-up is not uniform. Developed economies will likely see a slight acceleration from 1.7% growth in 2024 to 1.8% in 2025, while emerging markets and developing economies' growth rates are anticipated to remain stable. There's a sense of optimism emerging among business leaders. In the US, CEO confidence has risen for two quarters in a row, with recession fears fading significantly. China-based CEOs of US and European companies are also slightly more optimistic, with a more positive outlook on the short- term economic situation. European CEOs likewise show cautious optimism. Global Economy Settles Into Cautious Growth Pattern

Real GDP Growth (% YoY)

Forecast

4.2%

3.6% 2.3% 4.7%

3.2% 1.8% 4.2%

3.2%

1.7%

2018 2019 2020 2021

2022 2023 2024E 2025F

World

Advanced economies

Emerging market and developing economies

The Conference Board Measure of CEO Confidence

Q4 2023

Q2 2024

H2 2023

H1 2024

H2 2023

H1 2024

United States

Europe

China

Source: IMF World Economic Outlook, July 2024. The Conference Board. Note: Measure of CEO Confidence is a barometer of the health of the US economy from the perspective of US chief executives.

To combat inflation, central banks raised interest rates to levels considered restrictive to economic growth. However, with global inflation rates falling and projected to reach 4.4% by 2025, the IMF suggests these interest rates are nearing their peak. This normalization in interest rates and inflation eases the financial burden on businesses and consumers, potentially spurring an uptick in consumer activity and further investments from businesses. Leading economists are forecasting that advanced economies will achieve their inflation targets sooner than emerging markets. This recovery could be due to a combination of factors, such as stronger economic fundamentals and more robust policy responses. In recent months, the Swiss National Bank (SNB) and European Central Bank (ECB) lowered their interest rates. This is a positive sign for further cuts, with other markets following the impact of these rates closely. Inflation & Interest Rates Stabilizing

CPI Inflation Rate (%)

Forecast

8.2%

4.4% 6.0%

3.6% 2.0% 5.0%

5.9%

2.1%

2.7%

2018 2019 2020 2021

2022 2023 2024E 2025F

World

Advanced economies

Emerging market and developing economies

Interest Rate (%)

5.4% 4.3% 5.3%

Recent rate cuts by SNB & ECB

0.1% 1.3%

Jan-20 Nov-20

Oct-21

Aug-22

Jul-23

Jun-24

US (Fed)

Euro Area (ECB)

United Kingdom (BoE)

Japan (Bank of Japan)

Switzerland (SNB policy rate)

Source: IMF World Economic Outlook, July 2024, Interest rates as per central bank data of respective regions. Note: ECB = European Central Bank, SNB = Swiss National Bank.

Venture Capital & Private Equity Investment Outlook

VC Dry Powder ($B) by Vintage

PE Dry Powder ($B) by Vintage

$0 B $100 B $200 B $300 B $400 B $500 B $600 B $700 B $800 B 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

$0 B $200 B $400 B $600 B $800 B $1,000 B $1,200 B $1,400 B $1,600 B $1,800 B

2023 2022 2021 2020 2019 2018 2017 2016

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Dry powder for VC and PE has reached record levels, exceeding $700 billion for VCs and $1.5 trillion for PEs. This abundance of available capital is particularly of interest for edtech companies, with vast capital available for both fundraising and exits. Additionally, edtech-focused VCs are on the rise, with several significant fundraising rounds targeting various segments. However, converting this dry powder into actual investments may rely on the resurgence of strong exit opportunities for VCs through IPOs or M&A activity – something that is picking up significantly in 2024.

Source: Pitchbook as of March 2024.

EdTech Industry Overview

The State of EdTech

EdTech stands as a beacon of adaptability. The pandemic drove unprecedented enthusiasm for remote learning, and while M&A activity waned in recent years, its continued significance is underscored by the transformative power of AI sweeping across industries, the stabilization of interest rates, and the increased investment in employee learning by global businesses. The adoption of EdTech in youth education maintains a strong foundation for the industry — the reported use of EdTech grew 99% in K-12 schools since 2020 and accounts for more than half of industry expenditures. However, the evergreen sector finds continued growth in professional development and employee upskilling. Personalized training, support, and career development initiatives offered by EdTech foster stronger working environments and are strategic tools to attract and maintain top-tier talent. This shift both enhances workforce capabilities and helps organizations recruit diverse and skilled individuals seeking progressive career pathways. These trends create a bright outlook for EdTech — and a promising trajectory of capital inflows are anticipated to propel the sector to new heights. Projections show sustained growth and impactful innovations to the future of education and workforce development on a global scale.

Source: Exploding Topics 2024

EdTech Industry Outlook 2024

(In $USD Billions) MarketValuation Outlook

491

435

385

341

302

268

237

210

186

165

146

2023A

2024E

2025E

2026E

2027E

2028E

2029E

2030E

2031E

2032E

2033E

The global EdTech market reached a value of $146 billion in 2023 and is projected to grow at a CAGR of 12.9% to $491 billion by 2033 . Deployment of accumulated Private Equity dry powder could increase in 2024 as inflation slows and interest rates begin to normalize. The software segment is projected to experience the fastest growth rate throughout the forecast period because of the continuous technological advancements in online education and corporate upskilling alike.

9 Source: Grand View Research, market.us, Thinkific, Forbes, Arizton

Trends Driving the EdTech Market

• Growth in gamification • Adoption of hybrid learning models • Preference for personalized learning • Higher focus on mobile learning • Increased use of virtual & augmented reality

Opportunities

• Improvements in connectivity infrastructure and smartphone penetration • Expansion of 5G technology • Growing investments by PE & VC firms • Rise in demand for online and remote learning • Requirements for digital skills • Rise in cost of traditional education

Growth Enablers

• Data security concerns • Evolving rules and regulations • Emergence of open-source solutions • Infrastructure challenges

Restraints

EdTech Subsector Breakdown

Changing Demands in Education

Key Trends

Overview

Digital preference over printed content for the following reasons: • Digital content is easier to generate, comes and in audio and visual form, and scales better than printed content • Digital content is available in different languages and can be easily translated and retrieved by a wider user base Nano learning targets today's learners' busy schedules and short attention span. • Nano learning maximizes retention and engagement by breaking down complex topics into digestible and focused learning units • Smartphone apps like Duolingo and Quizlet enable nano-learning through short sessions at any time of the day

Growing Digital Education Solutions

Nano Learning

Digital experiences drive more user-engagement. • AR/VR, AI and IoT implementation leverages gamification and interactive experience to their customers • Zspace, Inc. has created a new AR/VR solution that allows students to learn multidimensional content

Evolving Technology

Asynchronous education helps professionals and students learn in-demand skills at their own pace. • The job market seeks specialists, driving demand for asynchronous education tools — practical courses, boot camps, and certifications. • Interactive whiteboards, simulation-based learning, SD cards, laptops, and tablets significantly drive hardware sales and EdTech revenue. • Technology-enabled services are expected to expand owing to the rapid developments in online education and hybrid learning.

Asynchronous & Hybrid Education

12 Source: Grand View Research, market. U.S., Thinkific, Forbes

EdTech in Schools

Statistics

Overview

In K-12 education, technology integration is witnessing a significant increase in adoption rates. Schools are leveraging interactive platforms and tools to enhance student engagement and learning outcomes. • EdTech usage in K-12 schools has increased 99% since 2020. • The K-12 sector dominated the EdTech market with a share of 39% in 2023. • The K-12 EdTech market is expected to be the strongest growing subsegment globally.

K-12 EdTech

Colleges and universities are increasingly embracing technology to offer more flexible learning environments. • Over 70% of colleges expect to launch one or more online undergraduate programs in the next three years. • The global higher education EdTech market is expected to grow at a CAGR of 18.6% from 2023 to 2030.

• The global higher education EdTech market size was valued at $42.6 billion in 2023 and is expected to reach $140.4 billion by 2030. These statistics show that EdTech is playing an increasingly important role in colleges. The majority of colleges plan to launch online undergraduate programs in the coming years. Students are also embracing EdTech solutions, with a high percentage reporting that it helps them improve their grades and study more efficiently. The EdTech market is expected to continue to grow, with the higher education segment projected to account for a larger market size in the coming years.

College EdTech

Source: Astute Analytica, Grand View Research.

EdTech at Work

Statistics

Overview

In the corporate sector, EdTech is a multi-billion-dollar industry, with digital learning emerging as a primary skill-building strategy. Companies are investing significantly in digital platforms for employee training and development. • Digital learning is the most popular corporate skill-building strategy. • The global corporate EdTech market is expected to grow at a CAGR of 18.8% from 2023 to 2030. • The market was valued at $36.1 billion in 2023 and is expected to reach $120.4 billion by 2030 . • Corporate training and development are significant expenses for many organizations, and EdTech provides a way to upskill the workforce in less time and for less money.

Corporate EdTech

Source: Research and Markets.

Job Training Goes Digital

Training Expenditures 2018-2023

(In Billions of USD)

2018 2019 2020 2021 2022 2023

Evolving workforce demands create new opportunities for investments. This is particularly true for generative AI, which estimates show will impact about 25% of all occupations and create a $16 billion opportunity in reskilling for displaced workers over the next few years. EdTech emerges as a primary skill-building strategy because it is accessible and reduces cost. Vendors cater to different organizations by offering diverse product portfolios and retain contracts by offering services tailored to specific business goals. While the institute segment of corporate education is projected to experience the fastest CAPR during the forecast period, EdTech shows continued tailwinds as businesses seek comprehensive integration of digital education systems.

102

Total Training Expenditure

Training Staff Payroll

Spending on Outside Products & Services

Source: Trainingmag, Morgan Stanley

EdTech M&A Activity

EdTech M&A Overview Number of Transactions by Sector Q1 2024 33% 27% 23%

Numberof Transactions by Geography 38%

29%

24%

10%

K-12

Higher Edu.

Corporate

B2C

Early Childhood

United States

Europe Asia-Pacific LATAM Africa Middle East

• The United States remains the most active for transactions by geography, followed by Europe.

• The K-12 subsector outperformed other industry subsegments accounting for 33% of transactions for the quarter.

Source: CapIQ, Pitchbook

US Edtech Market Update

US EdTech Transactions Per Quarter

(# of Transactions)

PE Strategic

379

Global inflationary pressures slowed EdTech M&A activity in 2023 as the Federal Reserve executed eight interest rate increases. The year saw 18 consecutive months of hiked rates — the longest streak since 2005. Increased interest rates led to decreased acquisition financing and EdTech M&A dollar volume. However, momentum returned in Q4 2023 and should continue through 2024. PE transactions continue to dominate Q1 2024, as 229 deals were announced, comprising 91% of total transactions. On a dollar basis, PE transactions comprised 99% of total EdTech volume during Q1 2024. Dry powder accumulations along with a normalization of interest rates could drive greater deal volumes. Given the projected return to historic market conditions — and the evergreen nature of EdTech — buyers should continue to seek investment opportunities in 2024.

307

287 276

325

278

251

247

219

263 246

193

239 241

229

217

199

169

54 44 41

37 37 30 24 20 22

Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24

US EdTech Dollar Volume per Quarter

(In Million USD)

5,604 5,841

PE Strategic

1,891

4,304 4,287

1,704

3,877

3,457

3,223 3,298

3,512

3,359

3,877

2,452

2,690

1,603 3,298

2,112

792 928 3,900 3,950 340 767

1,620

Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24

Sources: CapIQ, Pitchbook

EdTech Transactions

Timeline of EdTech Marquee Transactions

Acquisition of

Best Assistant

$2.0 Billion

$658 Million

$3.5 Billion

$3.7 Billion

$750 Million

$1.9 Billion

2019

2020

2021

2022

2023

2024

Acquisition of

$750 Million

$250 Million

$500 Million

$486 Million

$750 Million

$1.0 Billion

Sources: CapIQ, 451 Research, MergerMarket.

Selected Industry Precedent Transactions

Target

Buyer

Date Announced EV/Revenue EV/EBITDA Target Description

NM Udacity is a digital learning platform for consumers and enterprises. Udacity offers online courses in programming, business, AI and ML, autonomous systems, cloud computing, and real-world projects.

Mar-2024

10.0x

Jan-2024

4.1x

AXL is a global IT platform for digital educational course creators. Based in Lewes, Delaware.

NM Pflege Campus offers unlimited access to expert knowledge in nursing and medicine across 600+ training courses. Includes more than 2,600 learning units and 1,900 knowledge tests.

Jan-2024

51.7x Seably is a maritime training marketplace. The company offers a wide range of flag state-approved STCW courses, legislation- types training, reflective learning courses, and other customer-demanded trainings all in one place.

Nov-2023

3.3x

NM Richardson Sales Performance is a global leader in sales training and performance improvement. Richardson combines a blend of proprietary intellectual property, digital technology, a data-driven approach, and a worldwide network of sales experts to create one of the most differentiated experiences and scaled sales performance solutions available on the market.

Jul-2023

4.9x Equus Workforce Solutions is one of the largest workforce development organizations in North America, with over 3,000 employees operating across 38 states and territories.

Sep-2022

0.5x

4.5x Vitalyst accompanies Fortune 1000 companies in the adoption of cloud-based Microsoft business applications. Its more than 165 professionals currently support over 350 business applications for over 400 clients that operate in more than 20 countries.

Feb-2022

1.7x

NM Credly helps individuals translate their learning experiences into professional opportunities with trusted, portable, digital credentials. The platform empowers organizations to address skill gaps while attracting and retaining talent.

Jan-2022

15.0x

Sources: Company filings, Pitchbook, CapIQ

Largest EdTech Financing Deals in 2024

Deal Size ($M)

Company

Date

Funding Type

Company

Date

Funding Type

31-May-24

400

Later Stage VC

27-May-24

Later Stage VC

27-Jun-24

100

Early Stage VC

21-Feb-24

Later Stage VC

01-Mar-24

Early Stage VC

03-Jan-24

Early Stage VC

24-Apr-24

Early Stage VC

20-May-24

Later Stage VC

26-Jan-24

Later Stage VC

29-May-24

Later Stage VC

16-Feb-24

Early Stage VC

15-May-24

Later Stage VC

27-Mar-24

Later Stage VC

13-Jan-24

Later Stage VC

22-May-24

Later Stage VC

15-May-24

Later Stage VC

22-May-24

Early Stage VC

02-Apr-24

Early Stage VC

12-Jun-24

Later Stage VC

11-Apr-24

Later Stage VC

Source: Company filings, Pitchbook, CapIQ.

Lower Middle Market M&A Deals in 2024

Deal Size ($M)

Target

Buyer

Date

12-Jun-24

100

10-Jan-24

28-May-24

24-May-24

31-May-24

26-Jan-24

Source: Pitchbook as of June 2024.

Looking Ahead The convergence of advancements in artificial intelligence (AI) and the education sector in 2024 heralds a new era of opportunity and growth for EdTech. As AI continues to mature and permeate various industries, its application within education technology is poised to catalyze a significant boom. Notably, education technology companies are uniquely positioned to leverage generative AI, presenting untapped opportunities that traditional markets may overlook. This innovative approach has the potential to unlock immense value, with projections suggesting that generative AI could inject $200 billion into the global education sector by 2025. Furthermore, the imperative for reskilling and retraining in response to evolving workforce demands is creating a pressing need for investment. By 2025, an estimated $6 billion will be required to address this demand, presenting a ripe opportunity for EdTech companies to play a pivotal role in filling this void. Through their offerings of comprehensive learning content, programs, and services, EdTech firms are empowering professionals and businesses to remain agile, compliant, and competitive in a rapidly evolving landscape. The resurgence of valuations for EdTech companies underscores the industry's resilience and attractiveness to investors. Valuations across small, medium, and large EdTech enterprises have rebounded to pre-COVID levels and continue to surpass those of traditional businesses. This reaffirms the growing recognition of the intrinsic value and future potential inherent in the EdTech sector, driving heightened investment activity and optimism. The shift towards consumer-centric education delivery models, exemplified by Software as a Service (SaaS) and digital formats, is further democratizing access to learning opportunities. This trend enables individuals to consume learning modules rapidly, cost-effectively, and conveniently, fostering a culture of continuous education and skill development. As such, the increasing consumerism of education bodes well for the EdTech industry, positioning it as a beacon of accessibility, innovation, and prosperity in the years ahead.

Case Studies

Value Positively Exceeds Seller Expectations FE International helped achieve an offer that exceeded seller's valuation expectations by 20%

Positive Psychology offers a comprehensive suite of online materials, encompassing courses, workshops, and insightful blog content, catering primarily to the B2C sector. The company has empowered over 20,000 individuals to enhance their well-being and flourish in their personal and professional lives. By imparting the principles of positive psychology and the essential tools and techniques to apply them, Positive Psychology ensures that its customers lead more fulfilled, resilient, and meaningful lives. Company Overview:

Sold to

• Strong combined pro-forma financial profile with lucrative EBITDA margins. • Ability to cross-sell into respective product offerings and capitalize on operating synergies. • A leading education training and certification platform in the healthcare sector. Key Value Drivers:

Buyer Interest:

Process Results:

Digital Training & Certification Accredited Science Based Resource

• 100 Private Equity firms and 100 Strategic investors in healthcare/mental health space contacted. • FE was able to leverage its presence in the sector to identifyan opportunity for a larger overarching merger, which was accretive to shareholder value.

• Broad auction process with

significant private equity and strategic interest resulting in 5 bids for the Company.

• Ability to leverage industry relationships to identify a merger opportunity which would yield the highest valuation outcome for client and exceed their valuation expectations by 20%.

AI Writing Tool Receives 5 Offers After Selective Search FE professionals represented an Anonymous AI Writing Company in a competitive and successful sales process

This AI Writing Tool is a pioneering platform with innovative solutions for students, teachers, writers, and businesses across the globe. With over 10 million users and a presence in over 180 countries, the company integrates cutting-edge AI tools to enhance productivity and creativity in content creation. Key offerings include AI-driven writing, rewriting, homework assistance, grading, and plagiarism detection, all backed by robust research tools that ensure accurate and high-quality output. Company Overview:

Anonymous SaaS AI Writing Tool

Sold to

Private Buyer

Key Value Drivers:

• 86 Parties Contacted • 5 Offers Received Buyer Interest:

Process Results:

• As FE International knows the space very well, a focused, yet competitive process sale was achieved. • FE ran IOI and LOI stages and obtained five competitive offers for the business, meeting the owner’s expectations with a buyer able to execute seamlessly and at the right price

• Achieved $3M in annual recurring revenue by August 2023, indicating strong product-market fit and consistent revenue growth • Garnered 71 million website sessions in the last 12 months, demonstrating extensive user engagement and robust platform appeal • Realized compound monthly growth rates of 4% for ARPU and 3% for lifetime value • Impressive 4.6 out of 5.0 stars on Trustpilot

Broad Sale Process Lands Right Buyer FE International contacted over 400 buyers across multiple countries for Focus On Force

Focus on Force is a market-leading online platform supporting learning and certifications in the Salesforce ecosystem. The company has served more than 100,000 individuals and a comprehensive network of corporate clients with some of the largest names in consulting, banking, and accounting. It offers its community an enviable range of training solutions that continue to help people and companies thrive in an era of technical innovation. Company Overview:

Sold to

Key Value Drivers:

Buyer Interest:

Process Results:

Digital Training Products Cloud Computing Professional Certifications

• Robust traffic profile – The business attracted 3.3M visitors/year contributing towards its revenue with impressive 60% EBITDA margins. • Rapidly scaling market – with exposure to the growing Cloud Computing & CRM software market, the business was well positioned to capitalize on favorable macroeconomic tailwinds.

• 400+ parties contacted. • Notable parties included: Palladium Equity, Morgan Stanley Private Equity, LinkedIn, CloudAcademy, CourseHero, Pluralsight.

• Seller’s valuation exceeded through a lucrative offering with a leading strategic buyer. • K2 was able to raise prices on day one given courses were underpriced in the wider market.

Behind this Report

Alon Sheinberg Director

Ismael Wrixen Executive Chairman

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Alon Sheinberg has over a decade of experience in the finance industry including Venture Capital, Asset Management, and Investment Banking. He has advised 100+ clients on the sale of hundreds of millions in transaction value. He specializes in the education sector with a focus on professional training technology and services.

Ismael Wrixen is Executive Chairman of FE International. Before FE, Wrixen was in large-cap M&A investment banking, where he executed several high-profile public deals, namely in the technology sector. He is a member of the Forbes Finance Council and a NACVA 2018 40 Under 40 Award winner.

Thomas Smale Chief Executive Officer

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Thomas Smale dedicates his career to helping founders get acquired on their terms. He built FE into the leading advisor for lower middle market technology businesses. Thomas offers invaluable technical, diligence, and negotiation advice to early-stage and seasoned business owners alike.

Sandesh Sonar Associate

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Sandesh Sonar has over nine years of Investment Banking experience. He has executed over $500 million in capital raises for public and private companies. Previously, he was a Senior Analyst at Bank of America with a focus on the Japan and Southeast Asia region.

Randal Stephenson Head of Investment Banking

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Randal Stephenson has over 25 years of experience in both M&A advisory and debt and equity capital raising. Before FE, he held senior investment banking positions at Merrill Lynch, Jefferies, CIT Group, and Duff & Phelps. He has closed over 300 transactions valued at $44 billion across 22 countries.

About FE International Founded in 2010, FE International is an award-winning strategic advisor for technology businesses.

Sector Expertise

1,500 + Transactions completed on behalf of clients 1

Consumer Product Ecommerce Over 100 Successfully Closed Deals

Artificial Intelligence Over 15 Successfully Closed Deals

Agency & Marketing Solutions Over 50 Successfully Closed Deals

$48M Average Transaction Value

Percentage Completed Transactions 2 94.1% 70% +

Percentage of Sell-Side Transactions

Education Technology and Online Training Over 50 Successfully Closed Deals

Cybersecurity & FinTech Over 40 Successfully Closed Deals

Marketplace Apps Over 50 Successfully Closed Deals

Source: Company data. 1. Includes approximately 300 transactions completed by FE professionals while at other firms. 2. Sell-Side transactions, measured from the date of launch of buyer outreach and marketing.

London, UK

Warsaw, Poland

New York, USA

San Francisco, USA

Miami, USA

Mumbai, India

Awards:

Featured in:

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