Houlihan Lokey Advises American Institutes for Research

Houlihan Lokey is pleased to announce that American Institutes for Research (AIR) has divested its Assessment Division (Assessment) to Cambium Learning Group, Inc. (Cambium Learning), a portfolio company of Veritas Capital (Veritas). The transaction closed on December 31, 2019.

Launched in 2007, AIR's Assessment Division became a recognized leader in the development, delivery, and reporting for online educational testing of students in grades K-12. Delivering online educational assessments at scale, the organization has been at the forefront of the transition from paper-based delivery to online-based testing methods and computer-adaptive performance measurements. Assessment uses advanced technology to measure student progress and provide state and district level educators as well as families with timely, relevant information about teaching and learning. In 2018–2019, Assessment delivered almost 61 million online tests to about one-third of the nation's grade 3–8 students pursuant to contracts with more than 25 states across the U.S. The new company, operating as a wholly-owned subsidiary of Cambium Learning, is called Cambium Assessment.

The combination of Assessment and Cambium Learning creates a market-leading K-12-focused education technology platform providing end-to-end instruction and assessment.

Serving as the exclusive financial advisor to AIR, Houlihan Lokey leveraged its unique insight into education and state and local government contracting to consummate a transaction with substantial strategic value to all parties. The sale of Assessment to Cambium Learning highlights the positive market dynamics for well-positioned technology businesses serving state and local government customers and illustrates several key themes:

• Buyers are strongly attracted to education businesses with leading technology-enabled differentiators. This transaction highlights the continued strategic interest in education-focused technology platforms. Assessment's proprietary and innovative technology solutions such as machine-scored performance tasks, scalable architecture, and feature-rich capabilities—such as braille and language support—solidify its position as a leader in the online assessment space. Strong market tailwinds in the education sector ensure that technology businesses of scale will continue to derive significant interest from buyers.
• A track record of innovation drives significant growth opportunities in a highly attractive K-12 market. For more than a decade, Assessment has been a driving factor in the continued advancement of testing methods and technology across the K-12 assessments market, having delivered more than 130 million assessments since 2015. Continued growth in spending on testing and assessments as schools seek to better measure the effectiveness of learning programs ensures that companies with innovative solutions are well positioned for significant growth.
• Private equity-backed platforms remain highly active M&A participants. The government technology and education sectors have seen significant sponsor-backed platform activity in the past three years. With well over 100 PE-backed platforms operating in the combined sectors, these buyers remain some of the most active participants for attractive assets of scale in the market. Assessment is Cambium Learning's first acquisition since having been acquired by Veritas in December 2018.

Established in 1946, with headquarters in Washington, D.C., AIR is a nonpartisan, not-for-profit organization that conducts behavioral and social science research and delivers technical assistance both domestically and internationally in the areas of education, health, and the workforce.

Cambium Learning believes every student has great potential; teachers are mission-critical; and data, instruction, and practice work together to drive performance. With a portfolio of award-winning brands, Cambium Learning's digital and blended curriculum, professional learning, and assessment solutions drive proficiency, equity, and other learning outcomes in classrooms everywhere. Brands include Learning A-Z (online differentiated instruction for elementary school reading, writing, and science), ExploreLearning (online interactive math and science simulations, a math fact fluency solution, and a K-12 science solution), Voyager Sopris Learning (blended solutions that accelerate struggling learners to achieve in literacy and math and professional learning for teachers), Cambium Assessment (innovative state- and district-level assessment solutions), and VKidz Learning (online comprehensive homeschool education and programs for literacy and science).

Veritas is a leading private investment firm that invests in companies that provide critical products and services, primarily technology and technology-enabled solutions, to government and commercial customers worldwide, including those operating in the aerospace and defense, healthcare, software, national security, communications, energy, government services, and education industries. Veritas seeks to create value by strategically transforming the companies in which it invests through organic and inorganic means.

Houlihan Lokey's Aerospace, Defense & Government (ADG) practice is a leading M&A advisor to aerospace, defense, and government services companies in the United States. Since 2016, the practice has closed more than 70 transactions worth more than $11 billion in enterprise value. With a staff of approximately 30 investment bankers in Washington, D.C., Los Angeles, and Europe, Houlihan Lokey's ADG practice is among the largest dedicated industry banking groups worldwide.

Houlihan Lokey’s Technology, Media & Telecom (TMT) Group has earned a reputation for providing superior service and achieving outstanding results in M&A advisory, capital-raising, restructuring, and financial advisory services. In 2018, the firm's TMT Group was ranked as the No. 1 M&A advisor for U.S. technology, media, entertainment, and telecom transactions under $1 billion. Houlihan Lokey’s Training and Education team is part of the TMT Group and its focus on specific subsectors.

A key differentiator of Houlihan Lokey’s service and the ultimate transaction outcome is the firm’s seamless ability to market and effectuate transactions globally across industry groups, which specifically served Assessment by assessing and accessing interest from both the government and education sectors.