While mergers and acquisitions in the education-tech space have been red hot, last week’s announcement that 2U is acquiring edX for an eye-popping $800 million still caught everyone by surprise. The OPM (online program management) company that helps universities bring their programs into the online market will now own the pioneering MOOC (massive, open, online courses) provider created by Harvard and MIT in 2012.
What does 2U get from the deal? Access to edX’s 50 million users (the majority are outside the U.S.), 1,200 enterprise clients, a very good brand, more than 500 university partners, and 200 additional corporate-university partners. 2U’s current catalog of programs are too expensive for growth markets abroad, such as India and Southeast Asia, so the acquisition provides not only leads in those markets, but also viable product offerings. In an earnings call last week, 2U made the math clear: if it converts only .03% of registered edX learners into its regular offerings, it will reduce the cost of student acquisition by 10% to 15%. Cost of acquisition is huge in online education, 20% or more of the overall budget.
Almost no one is arguing that this is a bad deal. Harvard and MIT will see a tidy return on their investment and shed a money-losing business that was increasingly losing ground to Coursera, the for-profit online course and program provider.