acquisition by Why this matters to education

Today, the announcement of the acquisition of by its progenitor struck me first as odd, then as unnerving, then as smart, then as possibly game-changing.

Odd in that I didn’t understand why a company would acquire its non-profit spin-off. Didn’t they already own the .org? From a governance standpoint, maybe not, which might be one reason non-profit organizations and schools may have felt more comfortable with that entity.

Unnerved for the non-profits that may have made their adoption decision thinking they were working with a friendly peer non-profit, only to find they may soon be swimming in the open waters with all of the’s other customers. However, most non-profits I know use simply for the price breaks, not for any mission orientation.

Hence, this acquisition may be smart for I was on a call last week with someone seeking to learn more about the M&A industry in education. They were looking for big targets someone might acquire. As we went through the scant list of interesting targets with revenues above $100M, it was a pretty short conversation. But apparently has revenues of $250M. If it were a .com, it would likely have a billion-dollar valuation.

This deal might be game-changing, though, not simply because the current CRM / enrollment management / LMS landscape has a new competitor. There are two factors I believe will determine whether this deal is the start of something really big in ed tech:

First, does this signal an authentic shift by Salesforce to make education a priority? It would seem so.

Second, does this signal that Salesforce has a plan to make Education an important part of its strategy in powering the workforce? If so, then the game has changed.

Why? Because of what that would mean for the M&A market for the sector. A big problem ed tech entrepreneurs and investors face is the relatively thin M&A market for a sector of its size. I have believed for a while that this is the result of the economic structure of the industry.

For instance, without a vibrant consumer market for ed tech, it is hard for good products to find the traction they need, unless they find a strategic partner, investor or acquirer. But why is there no vibrant consumer market? After all, it is individual consumers of education that stand the most to gain — education as a gateway to a better life and better career is well understood. However, the gatekeepers of that journey have traditionally not been learners, but schools and their vendors (i.e., publishers).

Moreover, corporations and their demand for a skilled workforce at every level is the straw that stirs the education drink. Why pay $250K for a college degree? To get a job that makes the ROI on that (ridiculously expensive) investment worth it, despite the cost. But what role have corporations been playing in driving the education sector? Indirect and peripheral at best. Why would this be, if skilled workers are the corporate asset of the 21st century’s knowledge economy?

Enter Salesforce: connecting the dots between the supply and demand of skills. If Salesforce sees education — and hence, ed tech — as more than a “loss leader” but as a strategic lynchpin, what will that do to its M&A map?

And they are entering a stage that features:

  • Microsoft, which acquired LinkedIn, which acquired and has put LinkedIn at the center of the talent ecosystem in a serious way;
  • Amazon, which powers the majority of the ed tech sector on AWS, even if it hasn’t yet figured out its education market strategy;
  • Google, whose Google Apps for Education has changed the game around education’s digital infrastructure;
  • Apple, whose mobile devices — along with Google-backed Android — are in every student’s and worker’s pocket.

This ignores all of the major ed tech players, the private equity firms looking to change the market, the talent management providers on the corporate side or the emergence of the Chief Learning Officer to bring alignment to this space on behalf of employers.

These forces have circled around education for decades, but we may be hitting an inflection point where ed tech is not just a nice thing to do but the beating heart of the knowledge economy. If so, Salesforce’s announced move will be a sign of much bigger things to come.