Anthology: $1.6bn EdTech Roll-Up in Restructuring

Welcome to the 198th Pari Passu Newsletter, 

Today’s write-up is the second post of our three-part series, which will culminate in a broader essay on non-pro-rata (NPR) economics in Chapter 11 on Friday. Although we will not explore the NPR mechanics deeply in this writeup, this piece will provide the contextual groundwork for Anthology to explore the legal arguments in the finale on Friday. Last Friday, we discussed how the Bankruptcy Code requires equal treatment among similarly situated creditors in ConvergeOne (C1), where creditors attempted to achieve outsized non-pro-rata economics in bankruptcy by taking a controlling position prepetition. In Anthology, 1L TL lenders similarly attempted to take control prepetition by locking their superior position through an uptier that tightened documentation. Later in the writeup, we will discuss how beneficial this position eventually became in priority access to new-money participation and related economics (i.e., post-reorg ownership). 

Through today’s deep dive into the creation and fall of a leading player in the EdTech space, we will explore how intensifying industry competition and enrollment pressures, coupled with the complexity of realizing cross-selling synergy potential within EdTech end markets, ultimately weighed on Anthology’s performance. Within each disparate platform in the EdTech value chain that merged to form the modern Anthology business in 2020,  these legacy companies endured broader industry headwinds and product challenges predating the inception of the combined company. These factors culminated in a high-participation partial recapitalization led by an AHG of 1L lenders that would set the stage for a broader restructuring a year later. 

We are excited to explore the final case of our series. So, let’s dive in!

Anthology is a vertical SaaS platform that offers higher education cloud technology to 2,000+ colleges and universities as a provider of two key foundational software layers: the learning management system (LMS) and the student information system (SIS). The SIS software is a backend record system (or administrative software layer) used by higher ed institutions to manage transcripts, enrollment, billing, and financial aid. The LMS software is the front-end academic platform used by professors to deliver coursework, including hosting lectures, assignments, and grading. The company’s strategy is to cover all academic, administrative, and student engagement functions, completing the entire higher education software value chain and owning the entire student lifecycle from applicant to student to graduate to alumni donor. 

Before COVID, the primary delivery system for Anthology’s LMS software was on-premise licensed software that required an upfront fee with periodic maintenance services. However, since 2020, the company has improved the number of its clients using its new SaaS solutions to 60% from 35% before COVID, with retention rates in the high 90% [3]. The combined company’s core products are presently sold on a recurring subscription/licensing fee model, often as institution-wide deployments (typically not per-seat SaaS like Slack or a Bloomberg Terminal). These contracts provide recurring revenue that is supplemented by service revenue for one-time implementation and support. [2] [5] [14]

Following the Blackboard-Anthology merger in FY2021, which will be discussed in the next section, the company organized into four business segments. Notably, Anthology operates on a July fiscal year-end to align with higher education budgeting and the academic calendar. [14]

Anthology’s three smaller business segments (EO, LE, and SS) operate in a competitive landscape, with competing solutions from Ellucian, Workday, Oracle, and Jenzabar. The SIS/administrative software ecosystem is more fragmented and customized relative to the historically consolidated LMS market marked by a handful of scaled platforms. The rationale behind SIS software customization is that every school has different registration systems, tuition structures, advising systems, and other campus software, which must be integrated. Nevertheless, we will soon discuss how the LMS market became increasingly fragmented over time. 

Anthology’s origins reflect the gradual convergence of multiple software categories within higher education rather than the creation of a single-purpose platform. Historically, the LMS and SIS systems that define Anthology today were developed separately before merging to form the modern Anthology entity, alongside a broader ecosystem of point solutions addressing engagement, analytics, and alumni relations (LE and SS segments). [1]

Blackboard (LMS)

The modern LMS category began to take shape in the mid-1990s with the founding of CourseInfo in 1996 and Blackboard in 1997. These platforms digitized academic classroom functions at a time when internet adoption was accelerating across universities amidst the dot-com bubble in the late 90s. It was during this period that the universities’ demand for basic online communication transformed into managing coursework and student records at scale. In 1998, the two companies merged to form Blackboard, establishing an early leader in online learning infrastructure that grew rapidly. By the early 2000s, the company had expanded internationally and embedded itself deeply into institutional workflows, benefiting from high switching costs and long contract cycles. While typical SaaS enterprise contracts generally range from 1-3 years, higher education LMS/SIS contracts often range from 3-5 years, which was the case for Blackboard [2], primarily because universities prefer longer amortization periods given high implementation costs (transferring student records, data pipelines, downstream systems, integrations). [1]

Blackboard went public in June 2004, raising approximately $95mm by selling ~6.8mm shares at $14 per share. With ~37mm shares outstanding post-IPO, this implies an equity valuation of ~$518mm. The IPO proceeds were primarily used to fund product development and pursue acquisitions in adjacent software categories, as shown in Figure 1. By 2006, Blackboard controlled 70% of the higher education LMS market, making it the dominant platform in a newer software category that exhibited strong institutional lock-in. At the peak of its dominance, Providence Equity Partners, a PE firm focused on media, communications, education, and technology, acquired Blackboard for $1.6bn in an LBO at $45/share (21% premium) in July 2011. Given a  2011 EBITDA figure of $120mm, we arrive at an estimated EBITDA transaction multiple of 13.7x. [1][25]

However, Blackboard’s dominance began to erode in the 2010s as competition intensified from lower-cost and open-source alternatives such as Instructure (Canvas) and Moodle, which began to fragment the industry, resulting in declining market share for Blackboard. Thus, starting in late 2011, Blackboard pursued both product innovation and geographic expansion through additional targeted acquisitions to broaden the platform, including Perceptis and Fronteer, which expanded capabilities in student services and campus commerce. Aligned with its goal to win back market share, in March 2017, Blackboard launched “Blackboard Ultra,” a redesigned cloud-based LMS aimed at improving user experience and defending against newer, more intuitive competitors. In the same year, Blackboard’s flagship LMS, Blackboard Learn, had undergone a multi-year redevelopment culminating in a rushed 2017 relaunch that was rolled out before technical and customer support infrastructure was fully prepared. The rushed relaunch would lead to product challenges exacerbated by significant service disruptions, customer dissatisfaction, and elevated attrition for the business. Ultimately, although Blackboard invested meaningfully to stabilize the platform, the product turnaround took longer than expected; and, going into the pandemic, the product continued to lag competitors such as Canvas and Brightspace. After the merger in 2021, which we will discuss in the next section, Blackboard LMS would become the T&L segment of the combined modern Anthology.[14]

Anthology (SIS)

Parallel to Blackboard’s evolution, a separate set of companies was building complementary infrastructure across the higher education software stack. In July 2020, Veritas Capital combined three portfolio companies under one umbrella to form Anthology: Campus Management, Campus Labs, and iModules Software. Each of these businesses addressed a distinct layer of the student lifecycle. Campus Management provided student information systems (SIS), serving as the system of record for enrollment and academic administration. Campus Labs focused on student engagement and analytics, offering tools to track outcomes, surveys, and co-curricular involvement. iModules specializes in alumni relations and fundraising software, enabling universities to manage donor engagement and campaigns.

Together, these platforms generated $230mm in revenue or $68mm EBITDA annually and created a comprehensive offering spanning administrative infrastructure, student engagement, and post-graduation monetization to serve as a leading provider to 1,100+ higher education institutions in over 30 countries, but notably lacked a core learning delivery system. It is also important to note that prior to the roll-up of these portfolio companies in 2020, each Veritas portfolio company had a history of legacy acquisitions prior to the merger, as shown in Figure 1. While the 2020 merger of portfolio companies created immediate scale across complementary product categories in the EdTech value chain, it also introduced structural complexity from inception, as the combined business was assembled from disparate legacy systems with limited prior integration. The integration risk for Anthology in developing a more vertically integrated platform can draw parallels to PE software roll-up acquisitions, as covered in our Ivanti writeup. At this point in FY2020, Anthology was already at  6.4x gross leverage with only 1.25x interest coverage. With a TEV of roughly $1bn, Anthology had an implied equity value of ~$600mm, and the transaction EBITDA multiple was 14.7x.  [3] [7]

Following the merger, the final step in forming the modern Anthology business occurred a year later in Q4’FY2021, when Anthology acquired Blackboard for $1.9bn, up from the $1.6bn purchase price in 2011 by Providence Equity Partners. This transaction was set up as a sponsor-to-sponsor (Providence selling Blackboard to Veritas) LBO + immediate merger into Anthology. The thesis for the merger was simple: consolidate the entire EdTech value chain under one platform and cross-sell/upsell customers across both platforms. It combined Anthology’s lifecycle and administrative tools with Blackboard’s LMS, creating a comprehensive education technology ecosystem with complementary platforms. Each software captured a need in the student lifecycle, but the unified platform would need to realign GTM efforts, rationalize systems, and execute further integration plans to ever realize any meaningful cross-sell opportunities. When considering the tailwinds at the time, the acquisition seemed straightforward. First, the company was benefiting from secular tailwinds in a largely acyclical higher education software sector that was expected to grow 12% globally. Second, higher education institutions were showing a greater willingness to deploy new cloud-based solutions as existing tech solutions were 20+ years old, and COVID highlighted the importance of  IT to support remote learning for schools. [5] [14]

The $1.9bn sponsor-to-sponsor LBO was financed with $1.3bn 1L TL, $500mm 2L TLs, and $1,367mm of total equity comprising $610mm of unrealized “old” equity, $370mm of equity rollover from Providence (the seller, Blackboard’s sponsor), and $387mm new equity from Veritas (Anthology’s sponsor). The LBO + immediate merger refinanced and replaced the existing Anthology debt, implying ~$1.4bn of incremental debt from the transaction. The company also refinanced its $40mm revolver into a new $140mm 1L secured revolver. Based on an 8.7x post-transaction debt-to-EBITDA figure and $1.8bn of total debt from the merger, we can estimate the post-transaction EBITDA figure to be ~$207mm for FY2021. At the time of the transaction, Blackboard was reported to be “nearly 2x the size” of Anthology, according to Moody’s.[2] [5] [8] 

Although Blackboard had fallen from a dominant LMS provider commanding 70% global market share in 2006 to 27% in North America and 10% internationally in 2021, Blackboard remained a key player in the modern but increasingly fragmented LMS industry, serving eight of the ten largest school districts [4]. Anthology’s evolution (or at least its vision) reflects a broader structural shift within education technology: from fragmented point solutions toward integrated platforms capable of managing the entire student lifecycle. However, unlike organically built software companies, Anthology’s growth has been driven primarily through consolidation under private equity ownership. As a result, its foundation is not a single unified system, but rather a collection of acquired platforms stitched together, which is an important dynamic that shaped both its strategic positioning and operational complexity. Although $225mm of pro forma liquidity appeared ample, the business rested on a highly levered capital structure at 8.3x net leverage, leaving little margin for error. Based on ~$117mm of interest expenses and $207mm of pro forma EBITDA, Anthology had an interest coverage ratio of 1.8x entering FY2022. 

At the onset of the merger, Anthology seemed to have a strong growth runway with over 85% of pro-forma revenues being recurring and the company having almost $100mm professional services backlog and $700mm in bookings, which was supposed to represent a good baseline for performance over the next two years [5]. These bookings, coupled with cross-sell opportunities of end-to-end solutions to educational institutions, paved the way for deleveraging in subsequent years. However, the strategic ambition to create a unified platform masked a fundamental execution problem: Anthology was not integrating a small number of compatible systems, but rather integrating more than 25 acquisitions across legacy businesses. Integration required large-scale data migration, product rationalization, and retraining across institutional customers, all of which are inherently slow in higher education. At the same time, the company carried an inflated cost structure, including excess headcount and vendor commitments, that proved difficult to unwind as revenue began to soften. The result was a business that required sustained investment and stable demand to execute its integration roadmap, but lacked both. [6]

Although Blackboard faced some product challenges in the 2010s, this decade was marked by the rapid expansion of LMS adoption as universities increasingly digitized coursework delivery. However, following the Blackboard merger in 2021, the market had entered a more mature phase characterized by slower growth and heightened competition, which was partly due to a steady flow of growth funding to emerging EdTech companies. Critically, T&L, the company’s largest and most important segment, which represented the Blackboard legacy LMS software, was already in secular decline at the time of the merger due to a lack of product innovation and rushed product releases. While the segment continued to generate approximately $240mm or ~50% of total revenue, the underlying LMS product had been losing share to cloud-native competitors with stronger user experiences and more modern architectures [14]. As a result, Anthology entered the post-merger period dependent on stabilizing a declining asset (and supporting it with upsell/cross-sell dynamics) while simultaneously executing a complex integration strategy. Furthermore, Anthology and Veritas underestimated the decentralized nature of purchasing decisions within higher education. While Anthology’s strategy assumed that bundling LMS and SIS products would drive cross-sell synergies, in practice, these systems are selected by different stakeholders, including academics (deans, provosts, and faculty). These academics typically control LMS decisions, whereas administrative leadership, such as registrars and CIOs, oversees SIS selection. As a result, the anticipated linkage between the two systems was weaker than assumed, limiting the effectiveness of the company’s cross-selling strategy. [5] [11]

In subsequent years, this fundamental misunderstanding of cross-selling software to the higher education end market, especially for LMS, made it incredibly difficult to realize the synergies as Anthology faced continued integration struggles. Beginning in FY2022, rather than achieving synergy-driven growth, Anthology experienced approximately $80mm of revenue decline over two years and significant churn, as shown in Figure 5 below. This customer attrition was driven by competitive losses, aging products that had fallen behind competitive offerings, and customer dissatisfaction tied to implementation delays and system performance issues. 

In response to LMS customer attrition, Anthology divested higher-margin product businesses of Blackboard Collaboration for $185mm cash in June 2022 and Blackboard Community Engagement for $500mm cash in September 2022 to focus more on its higher education software offerings. The $685mm of gross cash proceeds were used to pay down its 1L TL by ~$528mm, with the remaining $160mm allocated to balance sheet liquidity[9]. The two divestments contributed to $118mm in revenues and about $50mm in EBITDA in FY2022, implying a blended transaction EBITDA multiple of 13.7x ($685mm/$50mm). By the end of FY2022, the business reduced PF net leverage to 7x with total outstanding debt of ~$1.3bn.

With these cash proceeds, it may seem surprising that Anthology decided to pay down debt instead of issuing a dividend. While public sources do not explicitly explain the rationale, Veritas’ conservative decision to delever likely reflected their confidence in the asset and desire to preserve liquidity amid near-term operational pressure. Given Anthology’s estimated FCF of ($68mm), the company had to deleverage to ensure the situation would not worsen with higher interest expenses.  The computed ($68mm) of FCF is the plug between Anthology’s starting $85mm cash balance and $160mm net sale proceeds to the $177mm ending balance for FY2022.

It was becoming progressively clearer that the company had been unable to capitalize on the growing trend in EdTech post-pandemic, specifically with the Blackboard LMS segment (T&L), with continued competitive market share losses in 2022. Most of the recent wins have come from displacing existing providers on the SIS segment, and Anthology struggled to transition the installed base for its LMS customers to the newest Anthology product offering, like SaaS Ultra. Nevertheless, despite integration and product challenges, the company still had ample liquidity of $317mm, which included $160mm of cash on the balance sheet from the sale proceeds.  In other words, the company was operationally struggling with product innovation and integration; however, its ample liquidity headroom and extended maturity wall gave the business additional time to turn around the business.  [10] [14]

As we discussed earlier, NRR collapsed 15% from 98% at Anthology’s inception in FY2020 to 83% by FY2022, and, simultaneously, the new pro-forma business shifted toward lower-value SIS products rather than higher-margin LMS expansion. The company attempted to offset significant churn through pricing actions and fixed-fee implementation contracts, but these were frequently mispriced, requiring years of internal labor commitments and resulting in unprofitable contracts where delivery costs exceeded contractual revenue. Additionally, Anthology maintains a significant portion of its COGS as fixed rather than variable and a large fixed cost basis for SG&A due to costs from engineers and product teams that did not decline proportionally to revenues without breaking the product. This fixed-cost-heavy structure was further pressured by unprofitable contracts that compressed margins and drove negative free cash flow, which was only exacerbated by rising interest expenses as the entire capital structure was priced in floating terms. 

In FY2023, renewal rates were still modestly down, with 6% churn and renewal delays, dragging revenue down. Meanwhile, the T&L Segment struggled with stiff competition from Canvas and Brightspace. While Fitch had expected revenues to grow in the low single digits, Anthology’s top-line ended up declining, and total bookings remained flat at $533mm in FY2023. Although Anthology could have partially offset these financial pressures through the anticipated revenue synergies from the 2021 merger, the company was unable to fully realize the expected cross-selling opportunities due to the aforementioned friction between the stakeholders who selected the SIS (administration officers) vs LMS (professors) systems at institutions. With these challenges, Anthology burned $151mm in cash [15]. Thus, the company’s reported cash balance declined from $177mm in FY2022 to $26mm in FY2023, as total liquidity dropped to $166mm, which included a $140mm undrawn revolver. 

In October 2023, Moody’s said it expected Anthology to burn $80mm to $100mm of cash annually in the next 12-15 months due to integration and debt service costs. Despite significant strides to bring its technology back to customer expectations in a turnaround process beginning mid-2023, the company remained challenged with locked vendor contracts on an inflated fixed-fee basis. In addition to the liquidity headwinds, several reports indicated that new bookings declined and the company experienced even weaker results in Q4’FY2023 and Q1’FY2024. In fact, the company reported only $33mm of EBITDA for FY2023. To summarize, continued competitive pressure, integration challenges, and unprofitable contracts eroded liquidity. With only a few months of liquidity headroom and a constrained revolver by the end of 2023, Anthology would need a near-term recapitalization. [9] [10] [12] [13] [9fin]

With a $26mm cash balance and 1L TLs trading in the 40s in early 2024, the company engaged an AHG of nearly all 1L TL lenders to inject new capital into the business,  culminating in an uptier transaction in April 2024. The transaction included multiple components, including: