The deal to combine Anthology and Blackboard came with a clearly stated goal when it was announced Monday: create a company offering a comprehensive, globally scaled education technology ecosystem.

Underlying the goal is the theory that a single company selling multiple software products and services can be valuable for both the schools that buy those services and for the company. 

For schools, the idea is that purchasing combinations of student information systems, enterprise resource planning, customer relationship management and learning management software from a single provider is easier than buying from multiple companies and navigating their different products. It can better enable data-sharing between systems, driving insights that can improve key goals like student progression and graduation.

For a company and its investors, the theory is that offering a full range of products creates an opportunity to cross sell. A college that uses Blackboard's LMS might be a good candidate to buy the products offered by Anthology, which was created by merging three companies in 2020.

But the idea hasn't always worked in U.S. higher education, in part because disparate groups drive many colleges' purchasing decisions. Faculty committees or provosts might be the key players in the purchase of an LMS, while other services might fall under the realm of a chief information officer.

The idea of combining services was popular in the 2000s with SIS and LMS companies, said Phil Hill, partner at ed tech consulting firm MindWires. But it never truly caught on.

Anthology and Blackboard's combination will be a test of how much market conditions have changed. Just how the company moves forward — and where — are of high interest among those who watch and invest in ed tech.

"Higher ed is not a bundled-type of market," Hill said. "That's their challenge. How can they do cross selling in higher ed, which doesn't naturally reward that?"

Plans to use data to drive outcomes

Harnessing data from better systems is a key selling point for the combined company, Anthology's and Blackboard's CEOs said in an interview Monday. They emphasized that the company's product portfolios fit together without overlapping.

Blackboard's CEO, Bill Ballhaus, emphasized data, breaking down data silos and finding insights that can improve outcomes that institutions value.

"That tends to catch the attention of procurement managers and senior executives in the institutions," Ballhaus said.

Ballhaus will leave the combined company after the deal's closing, which is expected later this year. Ballhaus plans to remain an investor in it, though. Anthology's CEO, Jim Milton, will remain as its chief executive.

The leaders haven't determined what branding the company will use going forward. One of Anthology's current owners, private equity firm Veritas Capital, will be majority owner after closing. Another private equity firm that is a majority owner of Anthology, Leeds Equity Partners, will hold a minority stake in the combined company, as will Blackboard's majority owner, Providence Equity Partners.

Together, Anthology and Blackboard have over 4,000 unique customers in more than 80 countries, Milton said. That includes more than 3,000 in North America.

In other words, a large chunk of North American colleges are using at least one of the combined company's products, providing many cross-selling opportunities. But global growth is a key part of the strategy as well.

Blackboard's footprint is large in many of its global markets, Milton said. Anthology, on the other hand, has a presence in more than 30 countries but is "much more nascent outside of North America."

Both companies have moved aggressively to deliver their products in the cloud, Milton said. That allows them to scale down to serve small institutions or scale up to work with large colleges that function around the world.

In many emerging markets, demand for higher ed is expected to rise — an important trend for growth-oriented companies facing a U.S. market where student demand has likely plateaued or peaked for many institutions.

'A classic kind of M&A transaction'

Those who watch and invest in the ed tech space said the deal makes sense on paper. But only time will tell how institutions will respond.

Higher ed is somewhat of a zero-sum game, said Trace Urdan, managing director at investment banking and consulting firm Tyton Partners. One company's gains tend to come at the expense of another's sales.

"This is something that's always distinguished higher ed from other corporate software," Urdan said. "Your argument is that your software is going to grow the business. That's a harder case to make in higher ed."

In that situation, a way to gain leverage is to have as many clients as possible and sell them as much as possible, maybe by offering bundled discounts. In retrospect, it seemed almost inevitable that Blackboard would find a way to tap the CRM, ERP and SIS markets, Urdan said. Building products in those lines would have been expensive and more challenging than a merger or acquisition.

"It's kind of a classic kind of M&A transaction," Urdan said. "They'll be able to realize a ton of synergies. They'll be able to reduce a lot of costs. Ultimately, what you have is the power of your distribution."

Urdan believes one-stop shopping for services will be appealing for universities. He'll be watching to see if other players in the market, like LMS providers who have been more successful recently than Blackboard or other ed tech companies, will follow suit.

Anthology will likely have more opportunity to sell its products to Blackboard customers than the other way around, Troy Williams, managing director at Achieve Partners, a private equity firm focused on the future of education and work, said in an email. That's because the LMS market is mature, and other providers have been taking market share from Blackboard.

Integrating the different products the combined company wants to sell will also be key. Anthology was created just last year with the merger of Campus Management, Campus Labs and iModules.

"The challenge is their solutions have been amalgamated via acquisitions under multiple private equity owners," Williams said. "While they have done a great job in rebranding everything Anthology and cross-marketing, it's unclear how much interoperability there actually is."

Also, the K-12 market has a more established track record of rewarding a consolidation strategy that includes academic functions, according to Hill, of MindWires. K-12 students tend to be less able to navigate between different systems because they are younger, he said. And higher ed's preferences can be an obstacle to large companies.

"There is often a cultural distrust of providers getting too big," Hill said.