PowerSchool Completes Schoology Purchase in March Toward ‘Unified’ K-12...

Mergers and Acquisitions

PowerSchool Completes Schoology Purchase in March Toward ‘Unified’ K-12 Data Ecosystem

By Tony Wan     Nov 27, 2019

PowerSchool Completes Schoology Purchase in March Toward ‘Unified’ K-12 Data Ecosystem
From left: Schoology CEO Jeremy Friedman and PowerSchool CEO Hardeep Gulati

Four years ago, when Hardeep Gulati took over as CEO of PowerSchool, the company numbered around 400 employees. Today, the headcount has ballooned six-fold, thanks to a steady stream of acquisitions.

The newest addition comes courtesy of Schoology, a K-12 learning management system provider that PowerSchool announced it was buying last month. The deal, which officially closed on Monday, marks the latest step in PowerSchool’s march to create a platform that connects the different digital tools that students and teachers use in everyday instruction.

Financial terms of the acquisition were not disclosed. According to Moody’s, the credit ratings agency, the deal was funded in part by a $70 million loan raised by PowerSchool, as well as a “substantial equity contribution” from Vista Equity Partners and Onex Corporation, the two private equity firms that share ownership of PowerSchool. Neither Gulati nor Schoology CEO Jeremy Friedman commented on the transaction amount.

This latest deal—the ninth since Gulati joined in 2015—is part of PowerSchool’s ongoing drive to create a one-stop shop where data about a student or teacher can be collected and shared across the different tools they use in their day-to-day lives. The effort, aptly named the “Unified Classroom” product suite, aims to connect assessment, enrollment, gradebook, professional learning and special education data services to its flagship student information system, which already houses a variety of data including attendance, discipline, health, roster and schedules.

“Having all the information together in one place,” says Gulati, “offers educators a better way to create a personalized learning experience in PowerSchool.” He adds: “Schools should have one seamless way to travel between their student information system, learning management systems and assessment tools through common data sharing experiences and capabilities.”

To create the Unified Classroom, PowerSchool has been on a buying binge with backing from Vista Equity Partners. The private equity firm purchased PowerSchool from Pearson for $350 million in 2015, and has since spent hundreds of millions more on acquisitions. Some of those assets expanded its footprint in the SIS market, like Sungard K-12 and Chalkable. Others were pieces for its new product suite, such as Haiku Learning, a learning management system that has a small market footprint, but which Gulati says helped to lay its groundwork for the Unified Classroom suite.

The latest—Schoology—adds a popular K-12 learning management system to the fold, one that has about 1,800 paying schools and districts, according to Schoology co-founder and CEO Jeremy Friedman.

Along with that comes new colleagues. The majority of Schoology’s team of 150 staff are expected to join their new owner, pushing PowerSchool’s headcount past 2,400 employees.

Schoology was founded in 2009 and has been working on data integrations with PowerSchool’s student information system as far back as 2012, Friedman adds. After PowerSchool rolled out its Unified Classroom suite in 2016, Schoology was tapped to be its first learning management system partner.

“Our customers have been asking us to deliver more of a unified solution with additional capabilities,” says Friedman, whose new title will be vice president of Schoology.

According to Moody’s, Schoology generated about $35 million in revenue but has never been a profitable business. The New York-based company has received more than $57 million in investment capital. Moody’s also estimates that PowerSchool will generate nearly $450 million of revenue in 2020.

While private equity firms have a reputation for trimming costs and redundant staff after a deal, Gulati downplayed the possibility of making dramatic cuts. He claims PowerSchool has been investing more $90 million each year on research and development across all its previous products—a figure that will now exceed $100 million with Schoology in the fold.

The next step should be a familiar one for Gulati’s team: making sure that the new piece snaps together as nicely as Lego bricks. But fitting together different technologies and workflows can be a challenge for systems built across different decades.

Still, amassing different products and data in one place puts PowerSchool in an enviable position to “corner the K-12 market ecosystem,” says Chris Stasi, who was previously the chief operating officer of Chalkable when it was acquired by PowerSchool. “They’re trying to provide the full stack of solutions to students.”

As PowerSchool acquires more technology tools under its umbrella, how it makes its data accessible to companies outside its ecosystem is an open question. School officials want the products they use to be able to share data with one another, regardless of who owns them. SIS companies often charge others a fee to access their data—which sometimes gets passed on to their customers.

Friedman says both PowerSchool and Schoology are committed to supporting industry open data standards, and that “interoperability will continue to be a priority.” Schoology will continue to integrate with other student information systems.

Even among PowerSchool’s 45 million users, about half do not use the PowerSchool SIS, adds Gulati.

The idea of a unified platform for education data has long appealed to school officials, says Paul Smith, who previously worked at PowerSchool for more than a decade, and is now head of marketing at ChalkTalk. “But to be fair, the industry has never had a good all-in-one solution. Maybe PowerSchool can be it.”

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