FOLSOM, Calif. - PowerSchool Holdings, Inc. (NYSE: PWSC), a prominent K-12 education software provider, is set to be acquired by private equity firm Bain Capital in a definitive agreement valued at $5.6 billion. This transaction will result in PowerSchool stockholders receiving $22.80 per share in cash, a 37% premium over the company's unaffected share price as of May 7, 2024.
PowerSchool, which supports over 55 million students and more than 17,000 customers globally, will continue to operate independently. Its comprehensive services range from classroom and administrative software to insights and analytics. The company's CEO, Hardeep Gulati, highlighted that Bain Capital's backing will enable further innovation and growth, particularly with PowerSchool's AI platform, PowerBuddy.
David Humphrey and Max de Groen, partners at Bain Capital, expressed their intentions to expand PowerSchool's reach and enhance its product suite. Vista Equity Partners and Onex Partners, existing investors in PowerSchool, will retain minority stakes, with both expressing ongoing support for PowerSchool's mission and future growth.
The PowerSchool Board of Directors, following a recommendation from a Special Committee of independent directors, has approved the merger agreement. Stockholders holding a majority of PowerSchool's outstanding voting securities have also approved the transaction by written consent, negating the need for further stockholder action.
The deal, which is anticipated to close in the second half of 2024, is subject to customary closing conditions and regulatory approvals. Upon completion, PowerSchool will delist from the New York Stock Exchange and become privately held.
Goldman Sachs (NYSE:GS) & Co. LLC and Kirkland & Ellis LLP are advising PowerSchool, while Centerview Partners LLC and Freshfields Bruckhaus Deringer LLP advise the Special Committee of the PowerSchool Board of Directors. Bain Capital's legal advisor is Ropes & Gray LLP. Debt financing for the transaction is provided by several investment firms, including Ares Capital Management and HPS Investment Partners.
This acquisition is based on a press release statement and further details can be found in PowerSchool's forthcoming SEC filings.
In other recent news, PowerSchool Holdings, Inc. has been the subject of significant attention due to its robust financial performance and potential acquisition by Bain Capital. The company reported Q1 revenue of $185.0m, slightly above consensus, and adjusted EBITDA exceeding expectations by 6.2%. Analysts from firms such as RBC (TSX:RY) Capital and UBS have updated their outlooks on the company, with price targets ranging from $20.00 to $25.00.
In addition to financial achievements, PowerSchool has made strides in integrating AI capabilities into its product offerings, closing deals worth approximately $400K and building a pipeline nearing $10M. Despite concerns about the company's reliance on ESSR funding and questions about its accounting practices, analysts remain optimistic about PowerSchool's growth potential.
InvestingPro Insights
As PowerSchool Holdings (NYSE: PWSC) prepares for its acquisition by Bain Capital, investors are closely monitoring the company's financial health and market performance. According to InvestingPro data, PowerSchool currently holds a market capitalization of $4.56 billion. Despite a challenging market, the company has shown a solid revenue growth of 12.9% in the last twelve months as of Q1 2024, with an even more robust quarterly revenue growth of 16.0% in Q1 2024.
InvestingPro Tips suggest that while PowerSchool is expected to see net income growth this year, analysts have concerns as evidenced by six analysts revising their earnings estimates downwards for the upcoming period. Additionally, the company's stock is considered to be in overbought territory according to the Relative Strength Index (RSI), which could indicate a potential reversion of the recent price increases. PowerSchool's trading at a high revenue valuation multiple also indicates that the market has high expectations for the company's future growth.
In light of these insights, investors may want to consider the potential risks and rewards associated with PowerSchool's financial position. For those seeking more in-depth analysis, InvestingPro offers additional tips on PowerSchool, which can be found at https://www.investing.com/pro/PWSC. Use coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the 11 additional tips that could further inform investment decisions regarding PowerSchool Holdings.
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