Todd Brekhus learned a lesson in effective communication back in 2003. At the time, he was part of PLATO Learning, a school instructional software vendor now known as Edmentum. PLATO had reportedly spent about $50 million to buy another company to expand the school grades it serviced. But according to Brekhus, now chief product officer at Renaissance Learning, PLATO failed to effectively communicate how Lightspan fit into the company’s strategy.
As part of that failure, 80 percent of Lightspan's employees were cut or left due to poor strategy and communication. “Lightspan employees never understood why they were bought,” Brekhus told a crowd Wednesday.
Brekhus’ story was just one shared from the main stage during the last day of the Software & Information Industry Association’s Ed Tech Industry Conference in San Francisco this week. He and two other education technology executives shared lessons learned from both sides of the table when it came to mergers and acquisitions.
A windfall acquisition is often the dream for many startups—and especially so for their investors. But for new entrepreneurs, the process can be full of surprises that test one’s patience. That was the case for Kelly Shaw, the CEO of Ooka Island, a digital phonics business which was sold to Scholastic in 2017. The amount of time that passed between verbal commitment and final signatures caused her many sleepless nights. “It was an intense process,” she said. “But the longer we worked together, the more I felt it was the right decision.”
She learned not to include the entire team during the due diligence process, when an interested buyer requests and scrutinizes detailed information on the potential acquisition. Instead, a small team should handle those questions while the rest of the employees make sure the company continues to meet the day-to-day needs of its customers.
Peter Bencivenga learned that while every executive should plan for an acquisition, the actual conversations with potential buyers can happen by chance. Case in point: He began receiving messages from a private-equity firm interested in his education data management platform, DataCation, after publishing an article in 2014 (in EdSurge) about how his product found traction in a market where IBM and Pearson had struggled, and sold to over 5,000 schools.
“You never know how or why the conversation comes up,” said Bencivenga, now president of CareMonkey. “You want to get the best value and, at the same time, the right fit.”
Brekhus is a seasoned survivor of education mergers and acquisitions. In a span of 15 months, his last startup, digital reading platform myON, switched hands three times. It was acquired by private-equity firm Francisco Partners in February 2017, then sold to Renaissance Learning in March 2018, and then returned back to Francisco when Francisco acquired Renaissance in May 2018.
He said that weathering the musical chairs of new owners has informed how he handles the aggressive growth strategy pursued by Renaissance, which acquired Early Learning Labs and Freckle Education this year. When it comes to interacting with and integrating new teams, Brekhus prefers to err on the side of over-communication. “We send emails, we have meetings face to face,” he said.
Staying hands off from an acquired company’s business is also a must, Brekhus added. Renaissance could have forced its direct sales channel strategy onto Freckle, which operates on a freemium model. But that would risk irritating Freckle’s existing customers and partners. “It’d be wrong to totally change the business model,” he said. “We don’t want to disrupt it.”