Bain Capital LP is in talks to take Folsom-based education software provider PowerSchool Holdings Inc. private, The Wall Street Journal reported, citing sources close to the matter.
Sources said a deal with Boston-based private equity firm Bain could value PowerSchool (NYSE: PWSC) around $20 per share, compared to its closing price of $16.64 on Tuesday, the Journal reported. That implies a total valuation for PowerSchool of $6 billion, including assumed debt.
PowerSchool shares rose $2.51, or 15%, to $19.15 on Wednesday after the Journal's report.
The deal could happen in weeks, the Journal reported, citing sources it didn't identify. They also said it's possible that talks could collapse and not result in a transaction.
PowerSchool and Bain representatives declined to comment on the Journal's report.
"PowerSchool does not comment on rumors and speculation, and as the leading provider of cloud-based software for K-12 education in North America, is focused on delivering innovation, value and end-to-end support to our over 17,000 customers worldwide," the company said in a statement provided to the Business Journal.
The Journal's report comes a day after PowerSchool reported earnings and held an hourlong discussion with investors and analysts.
PowerSchool has recently been the target of New York-based short-seller investor Spruce Point Capital Management LLC, which published a critical report about PowerSchool in April. Spruce Point's report forecast that PowerSchool shares could fall 30% to 60% from their then-closing price of $19.73.
Shares of PowerSchool dropped nearly 10% in April following the release of the report by Spruce Point, which said PowerSchool faced financial headwinds and potential state privacy law violation concerns.
On a conference call with investors and analysts Tuesday, PowerSchool executives addressed those concerns, though without referring directly to the report. CEO Hardeep Gulati said he expected school districts to continue contracting with PowerSchool, despite an upcoming loss of extra federal funding schools received during the pandemic. He also said PowerSchool's products comply with privacy laws. He forecast that the company could reach $1 billion in annual revenue in the next three years.
On Tuesday, PowerSchool reported its first-quarter loss widened to $22.8 million from $14.8 million in the year-earlier period. Revenue rose 16% to $185 million.
The company launched in Folsom in 1997, offering online tracking of grades and attendance. Over the years it's added more functionality and modules to support school administrators, teachers, parents and students on a cloud-based platform supporting 50 million students globally.
The company has been owned by a succession of different companies over the years, including Apple Inc. (Nasdaq: AAPL) and London-based educational publisher Pearson PLC. In 2016, Pearson (NYSE: PSO) sold PowerSchool to private equity firm Vista Equity.
In 2018, Canadian private-equity firm Onex Corp. invested alongside Vista, and they took the company public in an initial public offering in 2021. The private equity firms still own stakes in PowerSchool.
The Wall Street Journal reported that PowerSchool's talks with Bain comes at a time when private-equity firms are getting more active after a period of dormancy caused in part by the elevated interest rates of the last two years.
The Journal said private-equity deals are on the upswing compared with a very quiet 2023. So far this year they have struck $97.8 billion of leveraged buyouts, compared with $53.7 in the same period in 2022, marking an 82% increase, according to data provider Dealogic.
