Instructure Going Private with VC Buyout

• By Dian Schaffhauser
• 12/12/19

The company that staked its claim in the LMS market by taking its learning management system open source in 2011 has agreed in principle to be acquired by a venture capital firm. Instructure recently announced the transaction. Thoma Bravo has offered stockholders $47.60 per share in cash, valuing the company at about $1.79 billion. As of today, company shares are trading at slightly more than $48 on the New York Stock Exchange with a 52-week high of $54.31 and low of $33.47.

If approvals go through and shareholders agree to the buyout, the deal is expected to be completed in early 2020, according to company officials. Instructure, which has been trading publicly since 2015, would once again become a private company. Last year's revenues were $209.5 million, representing 30 percent growth over 2017.

According to ed tech analyst Phil Hill, Instructure is the No. 1 LMS by enrollment, with 35 percent, beating out three other top contenders for that title — Blackboard with Learn (31 percent), D2L with Brightspace (14 percent) and Moodle (12 percent). In combination, the LMSes from those organizations have snared nine in 10 LMS implementations for the higher ed marketshare in North America.

Thoma Bravo's portfolio is dominated by technology companies, including, in the education sector, Frontline Education (K-12 school administration) and Porter and Chester Institute (career schools in Connecticut and Massachusetts).

Instructure has its headquarters in Salt Lake City, with 1,400 employees there and in offices in London, Sydney, Hong Kong and Brazil. The company reported 4,000 customers in 80 countries. That included 500 corporate clients as of the end of 2017. And while it's known for its healthy presence in education (both college and K-12), Instructure's future relies on attracting corporate business, which it estimated at three times the size of education in a 2019 presentation to investors.

The Instructure management team, led by CEO Dan Goldsmith, was expected to continue running the company in its current roles. Thoma Bravo said it would support the company's increased investment in "innovation" and international expansion.

"Instructure believes the opportunity to become a private company will provide additional flexibility and position us to invest more strategically to drive innovation for our customers," said Goldsmith in a statement. "We look forward to working closely with all parties to complete this transaction and enter into our next chapter of growth and industry leadership."

Brian Jaffee, a principal at Thoma Bravo added, "We've followed the impressive Instructure growth story for many years and believe Canvas is a highly unique vertical market [software-as-a-service] leader with exciting scale and future growth potential. We look forward to building on the strong momentum in the business and accelerating growth and product investment both organically and through M&A."

The agreement includes a 35-day "go-shop" period, which ends on Jan. 8, 2020, allowing Instructure's board of directors to seek alternative acquisition proposals from third parties. According to a recent investor filing, the company has been considering merger and acquisition proposals over the last year from 19 different entities, settling on the agreement with Thomas Bravo as the "proposal that was ultimately distinguishable from the other proposals by price, certainty, the fact that Thoma Bravo was willing to provide an equity commitment for the entire purchase price and other key terms." Now it's going back to some of those other parties to see if the company can get a better offer.