Education services investment fades; funding slips for IT startups

S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.

The pandemic-era shift to remote learning boosted private equity investment in education services, though that tailwind is tapering.

Private equity and venture capital investment in the education services sector declined 47% year over year to $4.60 billion in 2023, according to S&P Global Market Intelligence data. That total was more than 55% lower compared with the $10.26 billion invested in the sector in 2020, when a massive switch from in-person to at-home learning put a spotlight on companies providing online education tools and services.

The decline in investment appears set to continue in 2024 after a lackluster first quarter, when the sector drew just $260 million from private equity investors, its second-lowest quarterly total in at least four years.

Still, some see a turnaround brewing, partly because investor focus has shifted from education software to consolidation opportunities in the fragmented early education space.

Read more about private equity investment in the education services sector.

CHART OF THE WEEK: Early-stage IT funding slides

⮞ In the first quarter, US and Canadian IT startups secured just $910 million from private equity and venture capital firms across 215 transactions, their lowest quarterly total since the first quarter of 2021, Market Intelligence data shows.

⮞ Both the value and volume of investment also fell sequentially from $1.21 billion across 307 transactions in the fourth quarter of 2024.

⮞ Software testing startup Antithesis posted the largest early-stage funding round of the first quarter with a $47 million seed funding round in February.

TOP DEALS AND FUNDRAISING

– X.AI Corp. raised $6 billion in a series B funding round. Andreessen Horowitz LLC, Sequoia Capital Operations LLC, Valor Management LLC and Vy Capital were among the investors participating in the round.

– KKR & Co. Inc. is acquiring an indirect minority stake in the Canadian clean energy transmission project, Labrador Island Link LP, from Emera Newfoundland & Labrador Island Link Inc. for C$1.19 billion.

– An investor group led by Energy Capital Partners LLC agreed to buy Atlantica Sustainable Infrastructure PLC in a deal valuing the renewable energy company at about $2.56 billion.

– EQT Private Capital Asia secured $1.6 billion in total commitments at the final close of BPEA EQT Mid-Market Growth Partnership SCSp. The fund invests in midmarket companies across Asia.

– Ardian raised €530 million for its third-generation growth fund. The Ardian Growth Fund III is already close to 25% capital deployment.

– TVM Capital Healthcare Partners closed on about $250 million for TVM Healthcare Afiyah Fund LP. The fund focuses on healthcare companies across Saudi Arabia.

MIDDLE-MARKET HIGHLIGHTS

– Dominus Capital LP recapitalized and participated in a funding round for Safe Haven Defense LLC, a provider of security window film solutions.

– LO3 Capital made an equity investment in plastic parts manufacturer NewCo Plastics LLC. The funding will support NewCo's purchase of Magenta LLC and its affiliates.

– Océan Participations SCR acquired a majority stake in French metal company CNI SAS.

FOCUS ON: EDUCATION SERVICES

– Sunrise Capital KK's Sunrise Capital IV fund, together with CLSA Capital Partners, purchased a majority stake in Japanese tutoring business Shinkyoiku Sogo Kenkyukai KK

– Sterling Partners and its affiliates agreed to acquire the remaining stake they do not already own in online education solutions provider Keypath Education International Inc. for about A$186.8 million.

– August Equity LLP invested through a round of funding in UK-based education services company Impact Futures Training Ltd.

______________________________________________

For further private equity deals, read our latest In Play report, which looks at potential private equity-backed M&A, including rumored transactions, each week.

For private credit news, see our latest private credit newsletter issued twice per month.