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With the economy still in the dumps and Americans looking for retraining, school has become cool and dealmakers want their slice of the pie. Online education is a sector where deal flow has been especially rising. The latest acquisition involves test preparation company Princeton Review Inc. (NASDAQ:REVU), which purchased privately-held online education career company Penn Foster Education Group Inc. for $170 million in cash on Monday. (Subscribers to The Deal Pipeline may read more here.) Goodwin Procter provided counsel to Princeton Review on the deal. The M&A team was led by John Mutkoski, Ed King, Andrew Goodman and Ben Chaset. Meanwhile, Mat Sibble and Erik Collins advised on senior debt team while Bruce Rader and Shmuel Klahr advised on subordinated debt. The equity financing advisement was headed by Brad Weber and Joe Theis. Venture capitalists have shown deep interest in the online education sector. Just last month Altius Education Inc. announced it expected an $8 million round of financing co-led by Maveron LLC and Spark Capital with participation from the Noah Fund. (Subscribers to The Deal Pipeline may read more here). The sector has offered venture capitalists some reasonable exit opportunities too especially with the IPO of Grand Canyon Education Inc. (NASDAQ:LOPE), American Public Education Inc. (NASDAQ:APEI), Capella Education Inc. (NASDAQ:CPLA) and Bridgepoint Education Inc. (NYSE:BPI) over the last four years when the IPO market in general has remained relatively quiet. Subscribers to The Deal Pipeline may read more here. The Princeton Review went public ahead of the pack back in 2001 looking to expand its Internet services and pay down debt. But the performance for the New York-based company's stock has been mixed at best with a glut of competition from Kaplan Test Prep, Sylvan Learning and Barron's Test Prep chipping away at its college and graduate school preparation franchise. Revenue decreased 7.6% to $31.5 million, compared to $34.1 million in 2008 for the quarter ended June 2009 as Princeton Review CEO and President Michael Perik blamed his company's weak earnings on "negatively affected by continuing macro-economic challenges and industry pricing pressures." -- Gerald Magpily
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It is interesting to note that the companies mentioned in the article are focused mainly on test-prep products. This seems to reflect not necessarily the increase in "education spending", but rather the increase in standardized testing that will continue over the years. The market demand for test-prep products started before the stimulus package.