Pearson Buys Online Education Company in Digital Market Push

on Oct 17, 2012
Listen

**Pearson’s Biggest Buy-Out in Years**

Education and publishing company Pearson (LON:PSON) – which publishes The Financial Times, owns book publisher Penguin and a 50 per cent stake in The Economist – has announced a $650 million (£403 million) acquisition of EmbanetCompass, a provider of online learning services to North American colleges and universities, The Times reported on 17 October 2012.

The purchase is Pearson’s largest in five years, since the $950 million (£589 million) deal for the acquisition of Reed Elsevier’s educational arm Harcourt in 2007. Pearson’s first major buy-out in years could also mark the last such deal under the company’s current chief executive Dame Marjorie Scardino, who is stepping down from her position in January next year.

According to analysts, the $650 million purchase price was a sizeable multiple of privately held EmbanetCompass’s revenues, expected to be about $130 million (£80 million) in 2012. The company, which Pearson bought from an investor group led by Technology Crossover Ventures and Knowledge Universe, works with more than 100 colleges and universities in North America and is expected to improve Pearson’s dividends and broaden its leading position in the educational services sector. The move, however, is also a significant push into the fast-growing digital market.

!m[Leading Learning Company Buys EmbanetCompass for £402m in Its Largest Acquisition in Five Years ](/uploads/story/593/thumbs/pic1_inline.png)Chief executive of Pearson North America Will Ethridge said: “The acquisition of EmbanetCompass extends Pearson’s investment in two areas where we see great opportunities for growth and impact — online education and educational services.”

**Pearson’s Increasing Emphasis on Digital Publishing and Education**
Ahead of the $650 million deal announcement, Pearson has stated that it aims to account for over half of its revenues from digital operations, outstripping its traditional publishing businesses by the end of the year. The purchase of EmbanetCompass is set to add momentum to this goal since the deal will significantly increase the share of revenues that Pearson derives from online sales and publication.
The educational services sector in the United States has recently been beset by financial problems and a decline in demand for print products. As a result, many institutions are moving towards the digital market. This migration has affected Pearson since, although based in Britain, the company gets most of its revenue from educational services in the US. The FT publisher has already stepped into the US online market through partnerships with institutions such as Arizona State University, California State University Online and the community college systems in West Virginia, Kentucky, Tennessee, Iowa and Colorado. By purchasing EmbanetCompass, Pearson aims to expand in this rapidly growing digital market and boost its online education sales.
EmbanetCompass’s President and CEO, Steve Fireng, who will remain in his position after the acquisition, sees the deal as a positive development for both sides. He said: “In the next five years, we expect nearly 4 million fully online learners will be in this market. By joining Pearson, the world’s premier provider of educational content, programs, services and platforms, EmbanetCompass has a tremendous opportunity to strengthen our relationships with academic partners, expand programs and services at our current academic partners, and continue to expand into new exciting markets both domestically and around the globe.”

Ad

Copy expert traders easily with eToro. Invest in stocks like Tesla & Apple. Instantly trade ETFs like FTSE 100 & S&P 500. Sign-up in minutes.

10/10

eToro offers real assets only, no CFD products. eToro USA LLC and eToro USA Securities Inc.; Investing involves risk, including loss of principal; Not a recommendation.

Get demo account

Featured Broker

Looking to invest?

Invest globally in stocks, options, futures, currencies, bonds and funds from a single unified platform, with our highest-rated broker.

Ad
Education Stock Market Tech