Virtual learning acquisitions shake up marketplace

Experts say virtual learning's rapid growth is attracting notice.

As K-12 virtual learning expands across the nation, two of the nation’s largest ed-tech providers have jumped into the virtual learning market with significant acquisitions they hope will boost their offerings and help them appeal to a wider set of students and teachers.

But the moves also come as a new report from the National Education Policy Center at the University of Colorado argues that K-12 virtual learning needs stronger government oversight.

Education publishing giant Pearson announced last month that it will acquire Connections Education for $400 million in cash. Connections Education’s Connections Academy business operates online schools in 21 states, with more than 40,000 students.

And Texas-based Cambium Learning Group, an educational company based in Nebraska that primarily focuses on serving at-risk and special student populations, is acquiring Class.com, a virtual learning solution provider that serves students and adult learners, for roughly $4.5 million in cash.

Connections Education’s revenue grew more than 30 percent each year for the past three years, and Pearson said it expects the acquisition to boost its earnings moving forward as it gives the company another foothold in the virtual learning marketplace.

Class.com delivers online courses for grades 7-12 and offers accredited instruction through Lincoln National Academy, an online high school. In a press release about the deal, Cambium executives said they were pleased to add Class.com to their offerings and that the acquisition would help Cambium expand its reach in the marketplace.

“The innovative, online courses offered by Class.com will allow us to expand further into the high school market and, in addition, address market fragmentation as more at-risk students either attend virtual charter schools or take online courses,” said Ron Klausner, Cambium’s CEO.

In a Getting Smart blog post analyzing what the Pearson-Connections acquisition means for the virtual learning marketplace, Tom Vander Ark commented that the transaction is good for all parties involved.

“For Pearson, this transaction signals a more rapid move into school management that was anticipated…In the transaction, Pearson gets a very good online learning operator and a comprehensive school management platform,” wrote Vander Ark, a former superintendent and Gates Foundation executive who is now CEO of Open Education Solutions.

He noted that Pearson traditionally has not wanted to cross the line “between supporting and operating schools,” but that virtual learning’s rapid growth likely influenced the company’s decision with this transaction.

“The combination adds to Pearson’s integration challenges, but they already operate as a portfolio company and this just presents new possibilities. Pearson has been marketing Florida Virtual [School] content. I suspect that Connections’ content library will just join the [company’s] growing portfolio of digital options for schools.”

“The shift to digital learning is happening much faster than most realize—and this transaction should raise that profile,” wrote Michael Horn, co-founder of the nonprofit Innosight Institute and a digital learning expert, in a Forbes.com article.

“This should open up more room for education entrepreneurs,” Horn wrote. “First, the exit for Connections—$400 million in cash—is a good one at least in monetary terms, which should encourage more investors to enter the space. Second, as this consolidation now occurs in the space, I suspect this may open up more headroom for some education start-ups in the near term.”

As the virtual-learning market continues to expand, the Colorado researchers cautioned that tighter oversight is needed to ensure high-quality educational outcomes.

They argued there is no solid research that supports full-time online education as a good educational model—even as it is being pushed by “cash-strapped states and school districts” as a “lower-cost alternative to traditional public schools.”

They added, “In states such as Florida, virtual schools are used as a loophole to avoid laws that limit the size of classes.”

Florida, home to the well-regarded Florida Virtual School, this year has allowed an expansion of virtual offerings, including the creation of virtual charter schools. Fifty-three of these have applied for authorization this year.

Many Florida leaders argue that virtual learning is key to getting students ready for the modern world, though they don’t all argue for full-time virtual lessons.

The problem, according to author and professor Gene Glass, is that “Cyber schools maintain few rules, little supervision, many students and families who struggle, and an unacceptably large number who won’t make it through to the end.”