Instructure Thoma Bravo Deal to Shape Education Technology Market

Instructure's acquisition by Thoma Bravo is making waves in the education technology market. The deal was announced in 2022, with Thoma Bravo acquiring a majority stake in Instructure for $2 billion.

Instructure's platform is used by over 70 million users worldwide, and its Canvas learning management system is a leading solution for educational institutions. The acquisition by Thoma Bravo is expected to accelerate Instructure's growth and expansion into new markets.

Thoma Bravo has a track record of investing in and growing education technology companies, with a portfolio that includes companies like PowerSchool and McGraw-Hill Education. This experience is likely to be beneficial in helping Instructure achieve its goals.

On a similar theme: Thoma Bravo Acquisition

The acquisition of Instructure by Thoma Bravo was a swift process, taking less than three weeks to finalize.

Instructure stockholders will receive $47.60 in cash per share, which represents an 18% premium to the Company’s 3-month volume-weighted average price as of October 27, 2019.

The Instructure management team, led by CEO Dan Goldsmith, will continue to lead the Company in their current roles. Thoma Bravo will support Instructure as it increases investment in education technology innovation and expands internationally.

A unique perspective: What Happens When Thoma Bravo Buys Your Company

The acquisition of Instructure by Thoma Bravo has been met with excitement in the LMS market.

Instructure's management team, led by CEO Dan Goldsmith, will continue to lead the company in their current roles.

Thoma Bravo will support Instructure as it increases investment in education technology innovation and expands internationally.

The press release explicitly mentions future growth that will or could include M&A – Instructure buying other companies.

Thoma Bravo has a history of acquiring and growing education technology companies, including Frontline Education, a school administration vendor for the K-12 market.

Instructure's stockholders will receive $47.60 in cash per share, representing an 18% premium to the Company’s 3-month volume-weighted average price as of October 27, 2019.

Instructure, the company behind Canvas LMS, was founded in 2008 and launched its flagship product around 2010.

The company makes its money on subscription and support fees for a "full" version of Canvas, and complex integrations and implementation work required to get the system in place.

Instructure's LMS software is inherently sticky, with long sales cycles and large-institution inertia.

By the time Instructure filed its S-1, they were able to demonstrate healthy contribution margins across cohorts.

The company has realized over 100% of revenue retention since it launched.

Instructure's sales and marketing costs are high, at 47% of revenue, and investments in R&D are also significant, at 32% of revenue.

The Education LMS market is highly commoditized, offering little opportunity for pricing power. Canvas, however, stands out for its ease of use and intuitive UI.

Canvas has rapidly adopted in the market, largely at the expense of Blackboard. In fact, one faculty member compared Blackboard to a pack-rat trying to cater to every desired option.

The corporate market presents a more significant opportunity for Instructure, with a TAM of over $10B estimated in 2019. This is largely due to the introduction of Bridge in 2015, which repackaged the efforts behind the Canvas LMS to offer solutions for employee development, assessment, and engagement.

I've seen firsthand that employee assessment tools can benefit from a spruce up, but it's difficult to see meaningful employee development implemented through an LMS. The training processes I've seen are often either rudimentary or high-touch and technical.