An overseas ed-tech firm wants to buy 2U. What could this mean for colleges?

What happens if the company that operates the college’s online programs changes hands? It is a question. on When the minds of high-level leaders try to buy 2U as an overseas ed-tech company.

India-based ed-tech behemoth Baijus has put more than $1 billion on the table to acquire an online program manager. Bloomberg It was first reported at the end of last month. 2U is one of the largest online program managers, or OPMs, in the US, expanding online-degree programs and partnering with more than 130 US colleges, including major institutions such as Arizona State, New York and Syracuse. Universities. It is also the parent company of online course provider edX.

This is a special situation – when an international seller wants to buy an American company that is not in direct competition with him. – It is very unusual in the field, say ed-tech experts. Chronicle. And it’s raising questions among colleges about what that means for the breadth and quality of 2U services.

When it comes to online degree programs, 2U is involved in the entire lifecycle, conducting marketing and faculty training, operating an online learning platform, providing 24/7 IT support, and hosting placement programs for post-graduate jobs and internships. It also prioritizes small class sizes for its degree programs, with an average of 16 students per class.

The concern among colleges is that if Baiju wants to shave costs or focus on short-term, course-level products, many institutions say they could scale back the “high-touch” model they’ve come to expect in exchange. To pay $2U million in education sharing agreements. There is also caution about the temporary disruptions that can occur when a company begins to reorganize.

College leaders fear Baiju’s goal is to “use leverage and cash flow to achieve another goal,” and that 2U’s customers are not a priority, said Clay Shirkey, associate professor of educational technology at New York University who works with 2U. . “That’s what we’re concerned about.

Dynamic market

Although the bidder was surprised, the 2U hunt was not given, industry experts said The publicly traded company’s market value is declining. They see this offering as indicative of the changing nature of the ed-tech market.

“We have a situation where both publicly traded companies and startups are cheaper than normal,” says Michael Feldstein, a longtime ed-tech consultant and blogger.

With that uncertainty, colleges are more likely to see the ed-tech companies they work with for contract periods — which can be 15 or more years, at least for some 2U institutions.

“Your favorite edtech vendor is more likely to get (or get) more than they used to in the next few years,” Phil Hill, another longtime industry watcher of the past few years, wrote on this development in a recent blog post.

Certainly, there is no agreement yet. There have been recent rumblings of “falling out of the biju closet” inviting the Indian media to scrutinize its fiscal health. Morning context It was reported this month. Of Byju’s $800 million this year, $400 million came from the CEO’s own investments. Out of this, another 250 million dollars have not been found yet Morning context. Last month, the company asked for an extension of time in paying for the early purchase.

2U is still in a vulnerable position, though. The publicly traded company’s share price has fallen more than 80 percent since mid-July. Its most recent market cap was $717 million, a fraction of its June 2018 high of $5.15 billion.

“We are reaffirming our commitment to 2U,” said OPM CEO Chip Pawkek to work closely and collaboratively with its partner institutions. But Paweke acknowledges that public companies are always for sale, Shirky added. “Chip, as CEO, has an obligation to take the offer to the board for consideration.”

A 2U spokeswoman declined to respond to questions about a possible acquisition by Baijus, saying the company’s policy is “not to comment on market speculation.”

A question of commitment

Never before has an international company sought to break into the US education market. About 30 American colleges For example, have active contracts only with Indian companies, such as a Chronicle US Department of Education Database Analysis.

Still, experts wonder: Why 2U?

It has Baiju’s. More than 100 million users On the learning app, however, its services are geared towards elementary and high school students, and focus more on short-term learning programs. and test preparation Rather than the degree programs that are 2U’s bread and butter. Weeks before breaking the news to 2U, Baiju was reportedly eyeing Chegg, an American company known for digital and physical textbook rentals, among other student services.

Of course there is a financial incentive. Economic Times In India reported That Baiju intends to become a publicly traded company next year, and may want to boost its portfolio to attract investors in the United States.

But Baiju’s existing focus on direct-to-consumer, course-level content makes experts like Hill think twice. The main interest is not so much in 2U, but in edX, which is offered at the university level in various subjects and holds the key to access. reported 42 million users. And if that is indeed the case: will 2U be removed or reduced for parts?

“EdX makes more sense to me” as the main picture, because the business-model is similar to Baiju’s and is less regulated, Hill said. I have a question [Byju’s] Commitment” to 2U current offerings, “specifically degree-based.

Further reading

Baiju did not respond to requests for comment on how it plans to operate 2U and edX at the time of the acquisition.

NYU’s Shirkey added that — in general — purchasing can be just a headache for customers (in this case, colleges). If the new owner goes on a hiring spree, there are on-boarding and HR distractions. If there is a shortage of staff, especially in places like call centers, it can take longer to get help. Existing employees may be reassigned to new roles to better fit the new owner’s agenda and disrupt the original business model.

“Almost nobody buys a company because they think, ‘Man, that CEO’s got the right strategy,'” Shirk said. And even if the strategy doesn’t change, if quality suffers during the transition, “It’s ours.” [the college’s] “The name on the line with the programs we offer.”

There were still many unknowns, experts and teachers. Reluctance to speculate whether an acquisition will push some colleges out of 2U and edX altogether. Faculty members at several colleges that work with 2U or edX declined or did not return calls for comment. Chronicle.

Jeff Knight, an education attorney, said how easy it would be for colleges to modify or terminate their agreements with a company like 2U. Many of them have been under contract with OPM for more than a decade. Simon University in Boston is locked in until 2039. The University of California at Berkeley is about halfway through a 15-year contract with 2U, expiring in mid-2029.

UC-Berkeley contractFormerly acquired by the Century Foundation, Baiju appears likely to allow the institution to end the arrangement if 2U’s services are reduced in tangible ways from the college’s signature, Knight said. It includes provisions that allow for a “material reduction in financial or other resources committed by 2U (or its successor) to the 2U Services” or a termination of “previously agreed upon operating plans.”

Contracts are “an art, not a science,” he said. And “the longer the term or the longer the relationship is designed to last, the more important language becomes.”