- Online program management company 2U plans to buy boot camp provider Trilogy Education for $750 million in a cash-and-stock deal, the company announced Monday.
- The acquisition continues 2U's expansion into the $366 billion market for corporate training and workforce education. It also grows 2U's university partnerships from 36 to 68, of which 32 will be new.
- Trilogy offers more than 120 programs across 45 institutions in fields such as coding, data analytics, cybersecurity, and user experience and user interface design. The mix of classroom-based and online offerings gives the OPM new reach into institutions while it hopes to help scale Trilogy's online programs. The move will also grow 2U's footprint abroad.
In a call with analysts on Monday, 2U CEO Chip Paucek said the deal "has been a long time coming," and that Trilogy's offerings will allow it to embed technical skills education into all of its courses and programs. "The technical competence … is directly relevant to the long-term future of 2U," he said.
The move comes as 2U looks beyond the large-scale, graduate-level degree and certificate programs for which it has become known. In 2017, 2U acquired GetSmarter, which offers "online short courses for working professionals," according to the announcement. And in February it partnered with Keypath Education to support smaller and lower-tuition programs.
As a result of the new Trilogy partnership, the University of North Carolina at Chapel Hill's Kenan-Flagler Business School will offer coding boot camp classes for credit toward an MBA, starting with an elective course in Python coding. The school will also develop courses and boot camps in technical skills for undergraduate, master's and executive development programs.
Paucek said the boot camp model is "relevant to all disciplines," and expects to add financial technology (fintech) offerings, among others. "Technical content needs (to) exist across the entire vertical base," he said.
In SEC filings announcing its fiscal year 2018 results, 2U said it was working with nine universities to offer more than 90 short-term courses. Of that group, three institutions accounted for 81% of the segment's revenue and launched 10 of the 17 new courses in 2018.
The short course segment generated $63.4 million in revenue for 2U in 2018, compared to $16.3 million from July to December of 2017, following the GetSmarter acquisition. Meanwhile, graduate programs brought in $348.4 million in revenue in 2018, up about 28.9% year-over-year.
The Trilogy deal also "marks the full entry of 2U into the corporate channel," Paucek said, adding that it represents a "really significant enterprise opportunity" for the company. More than 2,250 firms have hired Trilogy graduates, he said.
2U is among several universities and OPMs looking to address a market of adult learners looking to upskill or reskill. Arizona State University recently teamed up with a private equity partner to launch InStride, a public benefit corporation designed to connect employers and colleges to offer workforce education. It expects to add other universities, with "short-form credentials" on offer as well as associate, bachelor's and graduate degrees. Other statewide university systems have made moves to scale their online education and reach adult learners.
Trilogy has been rapidly expanding as colleges and universities look for ways to address the growing demand for technical skills. Its revenue grew from $8 million in fiscal year 2016 to a projected $135 million in 2019. And it made headlines late last year when it announced a partnership with the Harvard Extension School to offer a coding boot camp for adult learners in the Boston area.
Yet some critics have said universities should be clear with students that while such programs are offered under the institutions' banner, they are developed and operated by a third party.
The 2U-Trilogy deal price consists of $400 million in cash and $350 million shares of newly issued 2U common stock. The company is financing the cash portion with a $250 million loan from Owl Rock Capital along with its cash-on-hand. The acquisition is expected to close within the next 60 days. 2U said in a statement it plans to keep "substantially all" Trilogy employees and set new employment agreements with some management team members.
"While right now we are at a moment in time where people are talking about elite higher education given some of the news of the last month, we think the university continues to be the single best path of social mobility in the world … and Trilogy gives us an incredible new opportunity to reskill people for the needs of today and to continue to skill them over their life," Paucek said.