Dive Brief:

• Instructure, which makes the Canvas learning management system (LMS), announced Wednesday it would be acquired by private equity firm Thoma Bravo.
• The deal will take private the publicly traded company, which is valued at $2 billion in equity.
• Instructure CEO Dan Goldsmith told Education Dive that the company expects the deal will allow it to make a "more accelerated investment" in innovation and acquisitions, particularly for its Canvas business.

Dive Insight:

News of the acquisition follows reports last month that Instructure, which was founded in 2008, was exploring potential alternatives to being a publicly traded company, which could include a sale. At the time, the company said it had received interest from "multiple third parties."

The move comes as investment firms throw their weight in the ed tech sector. Ellucian's private equity owners are reportedly preparing to sell the company. And online program manager 2U is facing pressure from some of its investors to consider strategic alternatives, according to Bloomberg. As the publication reported, the same investor is pushing 2U and Instructure to consider other options to being publicly traded.

This activity reflects that ed tech is becoming more stable and less focused on "hypergrowth potential," said Phil Hill, an ed tech consultant who covers the LMS market.

"There's a broad trend of saying, 'OK, let's back off some of these huge growth expectations, and let's focus more on the business formulas,'" he said.

Although Canvas recently surpassed competitor Blackboard (which went private nearly a decade ago) in the number of campuses and students in North America it serves, the broader LMS market is slowing down according to data tracked by Hill, who has raised questions about how Instructure is classifying its growth in that segment specifically. 

Further, the company's corporate learning platform, Bridge, is not meeting its expectations.​

Goldsmith, who became CEO earlier this year, said the company has started to separate Bridge and Canvas' operations internally, reflecting comments made to analysts in October, before news of a possible sale. While Bridge's growth has been "very, very healthy," he told Education Dive, it is "at the stage of more of a startup" compared to the "more mature and established" Canvas. 

That separation could be a boon for Canvas, Hill explains. Instructure "should be focusing much more on the academic market now and not mixing up corporate and academic as much as they've done in the past,” he said. 

A private equity deal could further affect Canvas by affording expansion through more aggressive and ambitious acquisitions.

Goldsmith said the deal would give the company more opportunity to invest in Canvas, including through acquisitions, though he didn't elaborate as to what kind. In a press release, Thoma Bravo Principal Brian Jaffee hinted at the potential for continued growth through acquisition.

It's an area Instructure has been eyeing. Earlier this year, it bought digital portfolio company Portfolium for $43 million in cash and stocks and integrated it with Canvas. In 2017, it bought video-learning platform Practice.

How private equity will influence Instructure's operations largely remains to be seen. And as part of the deal, the company has 35 days to entertain other offers.

"This year has been spent figuring out what does the second chapter look like for Instructure," Goldsmith said. "We have a strategy in hand to go forward with the second chapter of our journey."