
Providence Equity Partners To Acquire Blackboard For $1.64 Billion In Cash - jamesjyu
http://techcrunch.com/2011/07/05/educated-buy-providence-equity-partners-to-acquire-blackboard-for-1-64-billion-in-cash/
======
desigooner
Blackboard is one of the crappiest products i've used at school. Thank
goodness I didn't have to put up with it for more than a couple of semesters
before my school changed out to a different product to manage grades/courses
etc. Administrative stuff like grades, assignments, etc. with Blackboard was a
mind numbing exercise. One would need the patience of a monk to deal with it.
The UX still looked like it was 1991 and nobody liked to use it, students and
instructors alike!

I don't know how many startups and companies have been stopped in their path
to improve service and experience by these litigious patent enforcing
jackholes.

~~~
jeffreymcmanus
This deal has nothing to do with technology and everything to do with how
difficult it is to sell into higher education.

~~~
getsat
And the fact that Blackboard has significant patents around what they do...

~~~
Turing_Machine
The '138 patent got stomped. Do they have others?

------
shii
They don't mention one of the main reasons they have such a huge market
share/monopoly and a still shitty product: they're litigious bastards who have
tons of inane patents for things like buttons and the like. They've sued the
hell out of their main competitor D2L and the courts ruled against them and a
lot of their patents across the board.

------
jakarta
At my work, we like to invest in companies that we think would be attractive
LBO Candidates... Blackboard really fits the profile.

1\. Entrenched business model

At my school we used Blackboard and we had about 50,000 students. Getting
everyone on board to switch from Blackboard to a new system would be pretty
tough. The university would have to spend a lot in terms of re-training which
would make it tough for a new system to gain traction.

2\. Recurring revenue stream

Blackboard has a recurring revenue stream which is pretty awesome for a
private equity buyer. You see, the PE game is pretty simple. You buy a
business for X, where about only 10-30% of X is actual cash you put up. The
rest comes in the form of debt.

A recurring revenue stream is great in that your subscription fees can cover
the interest payments on your debt and in many cases will allow you to have
more debt as part of your capital structure than normal. Lenders will see that
your business can generate a stable enough cash flow to support such large
amounts of leverage. A business such as Blackboard could potentially support
leverage that's on the high end of the scale because of its recurring revenue
stream.

3\. Ripe for cost cutting

A company like Blackboard is bound to have a good deal of fat that can be cut.
Slashing R&D funding and whatever growth spending will increase the amount of
cash flow that goes to investors. My guess is they will streamline the company
to be more focused on its sales force than whatever developer-base they have
in place at the moment.

~~~
gamble
I used to work for a startup with a similar product aimed at K-12. This is a
pretty good summary of how the whole learning management software industry
works.

It's unbelievably hard to sell educational software, but once you have some
customers signed up they will stay with a particular system for literally
decades before contemplating a change, regardless of how stagnant and outdated
the product becomes. As recently as five years ago, there were still a
significant number of schools using systems based on Foxpro.

Companies spent years establishing a customer base, and then they're almost
inevitably snapped up by a larger fish. My startup was purchased by a regional
educational software company, which was itself almost immediately afterward
snapped up by a private equity group.

------
kirillzubovsky
Although perhaps financially this totally makes sense, I had to use Blackboard
in the last year at University, and it pains me to see that somebody's paying
1.6 Billion for that piece of crap!

------
hammerdr
I feel really bad for the engineers at ANGEL Learning. They were acquired by
Blackboard a little over a year ago and now that they are just getting settled
in there is sure to be more sweeping changes.

As cut-throat as this seems and as piss-poor a product Blackboard is, there
are bound to be some talented engineers with experience in the education
vertical ready to take on BigCo available soon.

------
GaryOlson
Investment company buyouts of entrenched education infrastructure are all
about cash. The investment firm will cut any product development budget, raise
prices, cut customer service, and eventually drive all the customers away. In
the meantime, too many university administrations will waffle over the pain of
moving to another platform for about 5 years. See how Oracle is abusing all
the Sun education customers it inherited.

~~~
j_baker
_The investment firm will cut any product development budget, raise prices,
cut customer service, and eventually drive all the customers away._

You know, I would be shocked if they could do a better job of this than
Blackboard already has. It takes a special kind of malice to do that.

