Reuters: Blackboard up for sale, seeking up to $3 billion in auction

As I was writing a post about Blackboard’s key challenges, I get notice from Reuters (anonymous sources, so interpret accordingly) that the company is on the market, seeking up to $3 billion. From Reuters:

Blackboard Inc, a U.S. software company that provides learning tools for high school and university classrooms, is exploring a sale that it hopes could value it at as much as $3 billion, including debt, according to people familiar with the matter.

Blackboard’s majority owner, private equity firm Providence Equity Partners LLC, has hired Deutsche Bank AG and Bank of America Corp to run an auction for the company, the people said this week. [snip]

Providence took Blackboard private in 2011 for $1.64 billion and also assumed $130 million in net debt.

A pioneer in education management software, Blackboard has seen its growth slow in recent years as cheaper and faster software upstarts such as Instructure Inc have tried to encroach on its turf. Since its launch in 2011, Instructure has signed up 1,200 colleges and school districts, according to its website.

This news makes the messaging from BbWorld as well as their ability to execute on strategy, particularly delivering the new Ultra user experience across all product lines – including the core LMS – much more important. I’ll get to that subject in the next post.

This news should not be all that unexpected, as one common private equity strategy is to reorganize and clean up a company (headcount, rationalize management structures, reorient the strategy) and then sell within 3 – 7 years. As we have covered here at e-Literate, Blackboard has gone through several rounds of layoffs, and many key employees have already left the company due to new management and restructuring plans. CEO Jay Bhatt has been consistent in his message about moving from a conglomeration of silo’d mini-companies based on past M&A to a unified company. We have also described the significant changes in strategy – both adopting open source solutions and planning to rework the entire user experience.

Also keep in mind that there is massive investment in ed tech lately, not only from venture capital but also from M&A.

Update 1: I should point out that the part of this news that is somewhat surprising is the potential sale while the Ultra strategy is incomplete. As Michael pointed out over the weekend:

Ultra is a year late: Let’s start with the obvious. The company showed off some cool demos at last year’s BbWorld, promising that the new experience would be Coming Soon to a Campus Near You. Since then, we haven’t really heard anything. So it wasn’t surprising to get confirmation that it is indeed behind schedule. What was more surprising was to see CEO Jay Bhatt state bluntly in the keynote that yes, Ultra is behind schedule because it was harder than they thought it would be. We don’t see that kind of no-spin honesty from ed tech vendors all that often.

Ultra isn’t finished yet: The product has been in use by a couple of dozen early adopter schools. (Phil and I haven’t spoken with any of the early adopters yet, but we intend to.) It will be available to all customers this summer. But Blackboard is calling it a “technical preview,” largely because there are large swathes of important functionality that have not yet been added to the Ultra experience–things like tests and groups. It’s probably fine to use it for simple (and fairly common) on-campus use cases, but there are still some open manholes here.

Update 2: I want to highlight (again) the nature of this news story. It’s from Reuters using multiple anonymous sources. While Reuters should be trustworthy, please note that the story has not yet been confirmed.

Update 3: In contact with Blackboard, I received the following statement (which does not answer any questions, but I am sharing nonetheless).

Blackboard, like many successful players in the technology industry, has become subject of sale rumors. Although we are transparent in our communications about the Blackboard business and direction when appropriate, it is our policy not to comment on rumors or speculation.

Blackboard is in an exciting industry that is generating substantial investor interest. Coming off a very successful BbWorld 2015 and a significant amount of positive customer and market momentum, potential investor interest in our company is not surprising.

We’ll update as we learn more, including if someone confirms the news outside of Reuters and their sources.