What happens to a college’s online programs if the company that operates them changes hands? This is a question in Higher-ed leaders brainstorm as foreign ed-tech companies try to buy 2U.
India-based ed-tech behemoth Byju’s has put more than $1 billion on the table to acquire online program manager, Bloomberg First reported late last month. 2U is one of the largest online-program managers, or OPMs, in the United States, known for scaling online-degree programs and partnering with more than 130 U.S. 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 particular scenario – where an international seller is looking to buy a US company that it is not in direct competition with. — is highly unusual in the field, ed-tech experts say The Chronicle. And it’s already raising questions among colleges about what that could mean for the range and quality of 2U’s services.
When it comes to online-degree programs, 2U is involved in the entire life cycle, runs marketing and faculty trainings, operates an online-learning platform, lends 24/7 IT support, and hosts placement programs for post-graduation jobs and internships. It is also known to prefer small class sizes, with an average of 16 students per class for its degree programs.
The concern among colleges, these experts say, is that if Baizu wants to cut costs or focus more on short-term, course-level products, it could pull back on the “high-touch” model that many institutions have come to expect in the exchange. 2U million dollars to pay through tuition-sharing agreements. There’s also the vigilance, temporary disruptions that can occur when any company reorganizes.
College leaders fear that Byju’s aim is to “use the toehold and cash flow to meet other goals” and that 2U’s customers are not a priority, said Clay Shirkey, vice provost for academic technologies at New York University, which works with 2U. . “That’s why we’re concerned.”
A changing market
While the bid is surprising, industry experts note that hunting for 2U is not a given. The market value of publicly traded companies is declining. They see this offer as an indicator of the changing nature of the ed-tech market.
“We have a situation in which publicly traded companies and start-ups are cheaper than they normally would be,” Michael Feldstein, a longtime ed-tech consultant and blogger, wrote in an email. “Ad-tech companies or private-equity firms that have a lot of cash on hand are bargain hunters.”
With that volatility comes the possibility that colleges will see the ad-tech companies they work with change hands throughout the term of the contract — which, at least for some of 2U’s institutions, can be 15 or more years.
“Your favorite EdTech vendor is more likely to acquire (or acquire) in the next few years than in years past”, wrote Phil Hill, another longtime industry observer, in a recent blog post on this development.
To be sure, there is no compromise. There have been skeletons “coming out of Baiju’s closet” recently, which invites scrutiny of its financial health, Indian media outlet morning reference reported this month. Of the 800 million dollars raised by Byju this year, 400 million dollars came from the investment of its own chief executive. An additional $250 million of that has yet to be implemented, according to morning reference. Last month the company also requested an extension to pay towards previous acquisitions.
2U is still in a vulnerable position, though. The publicly traded company’s stock price fell by more than 80 percent from early 2021 to mid-July. Its current market value is $717 million, a fraction of its peak of $5.15 billion in June 2018.
OPM’s chief executive, Chip Pausek, has been “reassuring us of 2U’s commitment” to working closely and collaboratively with its partner organizations, Shirkey said. But Pausek also acknowledged that public companies are always for sale, Shirky added. “Chip has an obligation as CEO to consider the proposal and take it to his board.”
A 2U spokesperson declined to answer questions about a potential acquisition by Byju’s, noting that the company’s policy is “not to comment on market speculation.”
A question of commitment
It is not unheard of for an international company to enter the United States education market. About 30 American colleges, For example, only companies based in India have active contracts, according to one Chronicle An analysis of the US Department of Education database.
Still, experts wonder: why 2U?
Byju’s More than 100 million users in its Learning app, but its services are geared toward elementary- and middle-school students, and focus more on short-term learning programs. and test preparation than the degree programs that are 2U’s bread and butter. A few weeks before 2U received its offer, Baiju was reportedly looking at Chegg, an American company known for digital and physical textbook rentals, among other student services.
There is certainly a financial incentive. The Economic Times in India Reported Baiju wants to become a publicly traded company next year, and to grow its portfolio to attract investors in the United States.
But Baizu’s existing focus on direct-to-consumer, course-level content makes experts like Hill wonder if The primary interest is not so much in 2U but in edX, which offers university-level courses in a variety of subjects and holds the accessibility key. Reported 42 million users. And if this is indeed the case: are the 2U components removed, or scaled?
Given its business-model similarities to Baizu and the fact that it’s less regulated, “EdX makes more sense to me” as a main attraction, Hill said. “I have a question [Byju’s] Commitment” to 2U’s current offerings, “especially on the degree-based side.”
Baiju did not return requests for comment on how it envisions operating 2U and edX in the event the acquisition goes through.
NYU’s Shirkey added that — in general — acquisitions can be a headache for clients (in this case, colleges). If the new owner goes on a hiring spree, there are onboarding and HR distractions. If there are staff cuts, especially in places like call centers, it can take longer to get help. Existing employees may be reassigned to new roles to better align with the new owner’s agenda, compromising the original business model.
“Almost nobody who acquires a firm acquires it because they think, ‘Man, that CEO really got the strategy right,'” Shirky said. And if the strategy doesn’t change, if quality suffers during the transition, “It’s ours [the college’s] Reputation with the programs we offer.
With so much still unknown, there were experts and faculty members Reluctance to speculate whether an acquisition would push some colleges away from 2U and edX entirely. Faculty members at several colleges that work with 2U or edX declined or did not respond to requests for comment. The Chronicle.
How easy it is for disgruntled colleges to modify or terminate contracts with companies like 2U is very case-dependent, said Jeff Knight, an education attorney. Many of them are under contracts with OPM that have been going on for more than a decade. Simmons University, Boston, closed until 2039; The University of California at Berkeley is halfway through its 15-year contract with 2U, which expires in mid-2029.
UC-Berkeley’s agreementThe Century Foundation, previously acquired, appears to allow the organization to end the arrangement if Byzoo returns 2U services in a tangible way that departs from what the college signed on for, Knight said. These include provisions allowing termination in the event of “a material reduction in the financial or other resources devoted by 2U (or its successor) to 2U’s services” or “a reduction in previously agreed upon operating plans.”
Contracts are “an art, not a science,” he said. And “words are more important than language designed to last or to make relationships last.”