Nasdaq-listed technology education company 2U has announced it is acquiring Cape Town-based start-up GetSmarter for $103m, or about R1,4bn.
GetSmarter, founded by brothers Sam and Rob Paddock, develops online short courses in partnership with higher education institutions, including Cambridge University, Harvard University, the Massachusetts Institute of Technology and the Universities of Cape Town, Witwatersrand and Stellenbosch (Business School).
Both companies focus on delivering “high-quality, high-touch digital higher education from world-class colleges and universities”, 2U said in a statement.
The all-cash deal is subject to “certain price adjustments” and an earn-out payment of up to $20m in cash, subject to the GetSmarter team achieving agreed-to financial milestones through calendar 2017 and 2018.
Also, 2U will provide “certain members” of GetSmarter’s senior management team with approximately $9,4m of restricted stock units subject to their continued service to the company following the deal.
GetSmarter’s revenue was $17m (about R227m) for 2016, primarily generated by students enrolled in the company’s programmes with South African universities and one university in the US, 2U said.
“In late 2016 and early 2017, GetSmarter significantly increased new client acquisition, leading us to expect a substantial increase in the number of courses offered, the number of students taking courses and therefore an acceleration in their business and the business of the combined company,” it said.
GetSmarter has served more than 50 000 students since inception, with course completion rates averaging 88%.
Its portfolio includes about 70 short courses offered with its university partners. It operates under a revenue-share model with its university clients.
“The acquisition is expected to strengthen 2U’s position in the approximately $1,9 trillion global higher education market, which is expected to grow approximately 8% in 2017, while accelerating two of the company’s key strategic growth initiatives — expanding internationally and into non-degree alternatives,” 2U said in the statement.
“With GetSmarter, 2U expects to strengthen its position as a leader in digital education,” said 2U CEO Chip Paucek. “We also expect to accelerate our growth, extend our global footprint and provide a broader suite of services by matching up more students to the right programmes at the right time as they further their professional and personal development.”
Sam Paddock, who serves as GetSmarter’s CEO, said the deal will make the company stronger. “They bring deep experience and access to capital that allows us to pursue stellar growth and standout student outcomes at scale.”
Subject to various closing conditions, the acquisition is expected to conclude during the third quarter of 2017, 2U said.
Following the deal close, GetSmarter will continue to operate independently as a wholly owned subsidiary of 2U, based in Cape Town. It will continue to be operated by its current management team.