EUROPE: DISTANCE EDUCATION
Distant future Victoria Giles, corporate finance director at Grant Thornton UK, sets out the driving forces behind consolidation in the e-learning market, for which the Covid-19 pandemic has been a boon
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lower economic growth from political and Brexit uncertainty hasn’t dampened the resilience of the e-learning sector, with the UK market growing consistently at over 10% per annum in recent years. There is belief within the sector that disruption from the Covid-19 pandemic will simply accelerate long-term growth and stimulate innovation, as providers are well placed to offer value to clients in this period of significant workplace disruption. Further consolidation of the market through M&A activity is also expected to be a key growth driver as providers look to differentiate themselves within an increasingly fragmented market.
Minimal impact on e-learning sector from Covid-19 Our latest research ‘eLearning – navigating a thriving tomorrow’, based on conversations with a number of e-learning providers across the country and our market insight – found that the sector has felt a moderate impact from the Covid-19 pandemic. Most respondents had only taken small mitigating actions in response to the virus, but the impact felt has varied according to provider type. E-learning providers are focusing on measures to improve their cash flow and manage cost bases, with minimal use of government schemes, while content providers were found to have noted an initial uptick in demand, particularly for off-theshelf content as bespoke content has been harder hit. Platform providers have noted an upswing in inquiries from corporates testing the market for their first learning management system or seeking a more sophisticated solution. It’s no surprise, though, that face-to-face training delivery has plummeted, but some providers did report an increase in discussions with clients to help them move to virtual and digital training.
Drivers for consolidation and growth in the e-learning market As we start to move beyond lockdown and providers start to see how organisations’ new ways of working will either revert or become further embedded, our latest research explores the investment and M&A outlook for the sector. We identified four key drivers behind expected future consolidation: • Attractiveness of the e-learning market; • Increase in digital innovation; • The need for providers to differentiate; • And a focus on international expansion.
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Victoria Giles, Grant Thornton
There are more than 1,000 e-learning providers in the UK, many with revenue below the reporting threshold. This highly fragmented nature makes the sector attractive to entrepreneurs and investors pursuing a range of growth strategies. The market has seen trade players (Learning Technologies Group), pure play equity investors (Apse Capital and Altier Capital) and private equity-backed trade (Access Group) make a renewed push in the sector with acquisitions across 2019 and early 2020, driving deal multiples up. E-learning assets, particularly those of scale, with inherent technology IP and recurring software as a service (SaaS) and content as a service (CaaS) revenues have had the most competition for investment. This fragmentation is only expected to increase, with some providers experiencing growth in demand as businesses look to test the water with online platforms. The need for digital and online learning capability has grown and the pandemic will inevitably challenge the delivery of face-to-face training (online training only currently accounts for around 25% of the learning market). We anticipate an increase in digital innovation and a renewed focus on creating a more integrated training and development solution that is tech-enabled and digitally-led.
EducationInvestor Global • July/August 2020
