Apax Digital Fund to Acquire Lexile Framework Creator MetaMetrics

Jul 30, 2019

In journalism, a general rule of thumb is to write articles at an eighth grade reading level. That translates to a score between 985L and 1295L on MetaMetrics’ Lexile scale, which attempts to measure the complexity of text passages. According to the company’s online analysis tool, this paragraph passed the test.

Also used by more than 500 education publishers and companies, the Lexile score has become a staple on book covers, websites and, increasingly, educational technology tools. Today, that growing footprint has attracted the attention of an international private equity firm.

Apax Digital Fund has announced plans to acquire the Durham, N.C.-based company and expects the deal to close sometime in September, pending regulatory approval. This fund is the growth investment arm of Apax Partners, a private equity firm with seven offices across Asia, Europe, the Middle East and the U.S.

That global presence could help expand MetaMetrics’ footprint into overseas regions, says Malbert Smith, the company’s co-founder and CEO. “I firmly believe that over the next 10 years, the markets outside the U.S. will be our biggest,” he says.

Smith, along with Jack Stenner, founded MetaMetrics in 1984, while they were teaching at the University of North Carolina at Chapel Hill. The idea then, Smith says, was to “create a way to match assessments to instructional resources to support differentiated instruction.” In other words, he wanted to create a way where test results could inform how teachers can best tailor their lessons and resources to help each student, given their varying needs.

Over the next ten years, the pair received five grants from the National Institute of Child Health and Human Development to research and refine what would become its flagship offering: the Lexile framework.

By far the company’s most widely used product, the Lexile Framework for Reading is a scale that ranges from below 0L for beginner-level text to above 2000L for more complex prose. It uses an algorithm that quantifies the complexity of words and sentences into a single score, reflecting the difficulty of the reading material. Score ranges generally align with reading levels for different grades.

A Lexile score does not always convey age appropriateness, though. Researchers have pointed out cases where certain books written in very plain language, such as those written by John Steinbeck, score very low but are not suitable for children based on their themes.

Still, Lexile is used in print and online materials provided by publishers, test makers, curriculum developers and education technology companies. That includes developers of online adaptive tools like Renaissance Learning and Newsela, which typically offer reading assessments and materials based on the Lexile standard. MetaMetrics has also developed similar measures for Spanish and math.

MetaMetrics charges companies an annual licensing agreement that lasts from a few years to 10 years, according to Smith. It also contracts with 22 state education departments across the U.S. that use its framework in their statewide year-end tests.

Across these deals and partnerships, the company claims that more than 35 million students receive a Lexile measurement every year.

Both Apax and MetaMetrics have their sights set abroad. Already, Smith shares, MetaMetrics has signed licensing agreements with major companies in China, including New Oriental and online English tutoring startups like DaDa and VIPKid. Latin American companies have also recently notched deals to use its framework, he adds.

Though it is best known for its reading measurement framework, Smith says there’s still room to expand MetaMetrics’ literacy portfolio.

“We have just been measuring and helping students with one-fourth of the entire literacy construct,” he says, hinting that new offerings for listening, writing and speaking are on the company’s product development roadmap for the first quarter of 2020.

Supporting that growth could mean buying other companies—a tactic that Apax is eager to support. “We are always opportunistic when it comes to ways to catalyze growth through acquisitions,” says Marcelo Gigliani, managing partner at Apax Digital.

The Apax Digital Fund started in 2017 after its parent, Apax Partners, raised $1.1 billion to support minority investments and buyout deals in growth-stage technology companies.

While this marks Apax Digital’s first education deal, Apax Partners should know this sector well, having invested in several other education companies. Perhaps its most notable—and criticized—deal is the $7.8 billion purchase of education publisher Cengage in 2007. That company filed for bankruptcy six years later and reemerged with a focus on digital offerings. Apax still owns a stake in Cengage, which is now undergoing regulatory approval for a proposed merger with McGraw-Hill Education.

Terms of the Apax Digital Fund’s pending acquisition of MetaMetrics were not disclosed, although Gigliani says that “we are paying more than what Pamlico Capital paid,” referring to the company’s previous private equity owner. “This will be a solid exit for them.”


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