Tyton Partners Investment Banking division has completed a record number of transactions in 2022, with 24 deals completed ranging across the PreK-12, Higher Education Technology and Services, Post-Secondary Institutions, and Corporate L&D and Staffing markets. Despite the global dealmaking slump for mega buyouts, equity issuances and IPOs, and the continued risk of heightened inflation and higher interest rates, the current macroeconomic market conditions remain supportive for M&A in the lower middle market as a wide range of investors are seeking to de-risk and diversify, corporate divestitures have increased significantly, and VC firms have become more restrictive, which will drive select M&A opportunities across investor portfolios. Some of the factors influencing this accommodating environment are the following:
- Traditional banks and private credit continue to fund sponsor-led transactions in the lower middle market as they are deemed less risky and have performed better as an asset class in past recessionary environments
- PE-backed strategics will continue to seek tuck-in acquisitions vs. transformational M&A as it offers a lower risk strategy and a natural hedge to grow and diversify their businesses in a low growth environment
- Corporate divestitures have increased over the last 6 months, and we expect that trend to continue, as large strategics re-evaluate their portfolios and divest non-core assets to redeploy their capital and talent to higher growth areas that have stronger revenue and cost synergies with existing assets
- VC firms have become even more restrictive with their lower quartile portfolio companies, forcing them to pare down costs dramatically and re-evaluate their strategic options, including either down rounds, or a sale or merger
- Now that the worst of the pandemic is over, companies that relied on the cyclical boosts during lock downs and remote work environments, will have to prove their ability to sustain in a normalized environment. We believe that 2023 will expose the real leaders from organizations that received pandemic tailwinds without sustainable business models or products that relied heavily on a false sense of demand.
Tyton also believes that 2023 will bring more private sellers off the sidelines as pricing begins to stabilize, market volatility declines, and the debt markets become more accommodating to fuel traditional LBOs. Tyton Partners Investment Banking decision enters 2023 with over 30 active engagements as we expect another robust growth year for the firm as we see significant pockets of opportunity across the global knowledge markets. In addition to North America, Tyton Partners continues to invest in broadening our coverage in emerging and international markets, as we continue to see compelling opportunities for edtech in India, Asia/Australia, Africa and Latin America. These investments include targeted new hires in select markets and continuing our multi-year track record of driving significant amount of deal flow outside of North America. We believe our decades of transactional experience and deep sector and geographic knowledge of these markets will help our clients hedge their exposures and provide new opportunities to deploy capital as these markets benefit from continued investment from governments, NGOs, and private investors seeking to improve the educational standards and outcomes amidst the economic uncertainty.
Tyton looks forward to discussing these trends and their impact on your business over Q1, and supporting you in navigating the market shifts, where capital market’s compelling opportunities shall exist in 2023, and the identification of growth opportunities.
K-12 Transactions
The K-12 market remains a key area of focus for investors and strategics seeking opportunities that will address the shock of the pandemic to further stem learning loss; address critical teacher and staffing shortages; and provide schools, districts, and parents with the curricular and non-academic resources they need to improve student outcomes. Furthermore, ESSER funding from the federal government has bolstered many of these businesses as districts have additional resource to support novel solutions. Addressing these challenges remain top of mind, for parents, teachers, and district leaders, as the impact of the pandemic will be felt in K-12 for several years to come.Tyton represented a wide range of K-12 companies addressing these needs, including: FEV Tutor, the largest school-based tutoring services provider, in its sale to Alpine Investors; Curiosity Media, a digital language learning curriculum provider, in its sale to IXL Learning; Northlane Capital Partners in its acquisition of Infobase, a digital content and software provider; EdDirections, a school turnaround consulting provider, in its sale to MGT; and SchoolKidz, a school kitting business, in its sale to School Specialty.
Higher Ed Technology and Services Transactions
As colleges and universities continue to struggle to meet enrollment goals, address demographic shifts, prepare for an online/hybrid learning experience, and face financial hardships, there will be continued M&A activity and consolidation of solutions across the higher education student lifecycle. We believe that SaaS technology solutions, data and analytics providers that support institutional effectiveness, as well as AI and chatbots will be critical to addressing some of these institutional challenges. In addition, to support core technology solutions, colleges and universities require a layer of service provisioning to implement their technologies as well as outside services the address the market challenges to ensure their long-term success and viability.Tyton represented several higher education technology companies supporting higher education institutions, including: FineTune Learning, an AI-based assessment provider, in its sale to Prometric, a portfolio company of Barings PE Asia; Coursehero in its acquisition of Scribbr, a plagiarism and writing tool provider; PeopleGrove, a mentoring and alumni management solution, in its sale to Riverside; Core Higher Education, an externship and clinical back-office management platform, in its sale to Riverside; SPOL, an institutional effectiveness solution, in its sale to Cordance; BRANY in its acquisition of TechSoftware, a research and IRB management solution; FF Ventures and Edufficient, a lead generation provider, in its sale to PX; and GetMyUni, an international lead generation provider, in its sale to CollegeDekho.
Post-Secondary Institution Transactions
As colleges and universities continue to face financial hardships, we have seen an uptick in the number of closures, sales, and/or mergers of post-secondary institutions. We have seen interest in post-secondary institutions in the U.S. from consolidation platforms that are seeking innovative programs, online capabilities, and operational infrastructure as well as burgeoning interest from investor groups outside of the U.S.
Tyton represented Fielding Graduate University, a leading psychology and education graduate school, in its sale to Rowan Global; and California Southern University, a leading adult-focused doctoral institution, in its sale to Perdoceo.