Anthology bankruptcy reveals cracks in private equity higher education investment strategy

In September, edtech provider Anthology filed for chapter 11 bankruptcy in the Texas Southern Bankruptcy court, reporting more than $1 billion in liabilities across the company and its many subsidiaries. As one of the largest edtech companies operating in the United States, Anthology crumbled under the weight of private equity’s risky, debt-heavy strategy.

Leeds Equity Partners first invested in edtech company Campus Management in 2008. Campus Management offered several digital products such as student information systems, fundraising platforms, and payroll tools. In 2020, Leeds partnered with Veritas Capital to create Anthology by combining Campus Management with Campus Labs and iModules, two other edtech companies. Altogether, the new company offered more than a dozen products to higher education institutions, promising increased efficiency and seamless connection between products.

In 2021, Anthology acquired online learning platform Blackboard, then-owned by Providence Equity Partners. The deal made Anthology one of the largest edtech companies serving colleges and universities, again emphasizing the firms’ desire to create a company that could provide every product in one place. As a result of the acquisition, Veritas became the majority owner of the new company, with Leeds and Providence holding minority stakes.

Despite the company’s high aspirations, higher education institutions did not line up to buy Anthology’s full suite of products, instead preferring to maintain flexibility. The company’s aggressive acquisition strategy led to unexpected “operational hurdles” and “integration challenges” that took “longer than anticipated to effectively right-size.” In the two years prior to the bankruptcy filing, Anthology lost $80 million in revenue.

Anthology’s story reflects private equity common practice: firms acquire and merge smaller companies that do similar or complementary work in order to create a larger company that offers more services. In many cases, this practice successfully reduces competition as it corners the market. The firm can then take the company public or sell it to another private asset manager. In many other cases, the company cannot manage the rapid growth and ends up filing for bankruptcy – in 2024, private equity firms played a role in 56% of U.S. corporate bankruptcies with liabilities of $500 million or greater. Furthermore, private equity-owned companies accounted for 11% of all corporate bankruptcies in 2024, despite the fact that private equity accounted for just 6.5% of the U.S. economy.

Anthology will be divided into three parts, each continuing under new private equity ownership. Oaktree Capital Management and Nexus Capital Management will own the Anthology brand, focused primarily on learning systems. Ellucian, owned by Blackstone and Vista Equity Partners, will absorb the company’s enterprise operations. Encoura, also owned by Nexus, will take over Anthology’s student success business. In 2024, Nexus acquired college entrance exam provider ACT. 

Anthology CEO Bruce Dahlgren claims that the company will be able to “drive greater efficiency” after emerging from bankruptcy. The idea that downsizing will lead to better outcomes is in opposition to the company’s 2020 rhetoric, when Anthology’s private equity creators insisted that merging three companies would “enhance operational efficiencies.” While building a well-integrated system sounded promising, its failure to materialize may reflect a broader issue with private equity investment in the education sector: a mismatch between private equity’s appetite and educational institutions’ desire. One expert has found that higher ed institutions “have become more conservative buyers, stretching procurement timelines and delaying major renewals” and “are starting to prioritize affordable, compliant, and modular platforms over large legacy monolithic systems.”

In 2024, edtech bankruptcies such as 2U (online degree program platform) and AllHere (AI chatbot for K-12 schools) foreshadowed Anthology’s fall; private market interest and investment in the sector has not necessarily matched the expectations and needs of educational institutions. As Anthology and its assets continue to be managed by private equity firms, it remains to be seen whether companies will be able to successfully manage debt obligations while providing high quality services to schools.

As highlighted in the case of venture capital’s AllHere, a now-bankrupt company accused of mishandling sensitive student information, questions about edtech’s impact go beyond colleges and universities. Leeds represents the ultimate private equity player in the education sector, owning companies at nearly every stage of a child’s development and learning: child care (Big Blue Marble Academy), private schools (Fusion Education Group), curriculum development (95 Percent Group, TouchMath), and assessment administration (Learnosity). The firm also invests in INTO, a company that recruits and places students in colleges and universities across the US and United Kingdom. The firm makes money at each step of a student’s education, facing little scrutiny for its practices.

On rare occasions, however, private equity-backed companies are thrust into the spotlight following bad behavior. Leeds portfolio company Education Management Corporation found itself center stage after the US Department of Justice announced that former portfolio company Education Management Corporation would pay $95.5 million for illegally recruiting and misleading students at for-profit colleges and universities from 2006 to 2014. Leeds, along with Providence Equity Partners and Goldman Sachs, purchased EDMC in 2006; the company filed for bankruptcy in 2018. Despite this, Leeds continues to invest in for-profit education in Puerto Rico as the public university faces extreme budget cuts.

The profit-seeking motives of private equity firms do not always align with the needs or best interests of students – this has already resulted in multiple bankruptcies for Leeds-backed companies operating in higher education, with companies like AllHere and Edmodo facing scrutiny for K-12 student data practices. Educational institutions and investors should carefully monitor the risks of private equity investments in the sector, and consider implementing policies to protect students and investments from such risks.