Vista Equity to merge PowerSchool, PeopleAdmin with Onex investment: sources

(Reuters) - Private equity firm Vista Equity Partners Management LLC has agreed to merge two education technology firms it owns, PowerSchool and PeopleAdmin, with an investment from buyout firm Onex Corp ONEX.TO, valuing the combined company at close to $3 billion, including debt, people familiar with the matter said.

The deal, which will be announced later on Monday, comes as schools use more digital tools to help teachers, enhance learning and reduce operational costs. Buyout firms have been seeking to profit on this trend by snapping up educational software companies.

Onex and Vista will share ownership of the combined company once the deal closes, the sources said on Monday. PowerSchool’s management, led by CEO Hardeep Gulati, will run the combined company from its headquarters in Folsom, California, outside of Sacramento, the sources added.

The new company will have annual revenue of roughly $400 million, according to one of the sources.

The sources asked not to be identified ahead of any official announcement. Vista declined to comment, while Onex could not immediately be reached for comment.

Vista bought PowerSchool, which provides educational technology to schools from Kindergarten to grade 12 (K12), for $350 million in 2015 from Pearson Plc PSON.L. It has since spent more than $1 billion on PowerSchool acquiring eight other companies, including SunGard's public sector and education business last year.

PeopleAdmin, a talent management software firm based in Austin, Texas, was acquired by Vista in 2014 for an undisclosed sum. It will add back office capabilities and new human resources services to PowerSchool beyond classroom products.

The investment in PowerSchool represents Onex's biggest investment in the education software sector to date. Last year it hired Laurence Goldberg, a former head of Barclays Plc's BARC.L technology, media and telecom investing banking business, to find more such deals.

Vista, whose founder Robert Smith was the son of two public school teachers and principals, has invested in the educational sector extensively. In 2014, it sold Relias Learning, a combination of two companies, to Europe’s largest media group, Bertelsmann SE & Co. It completed a $1.55 billion deal to buy Advisory Board Co’s education business last year.

The educational software sector has seen a string of private equity deals. In January, buyout firm Silver Lake acquired a majority stake in digital education company Weld North Education LLC from private equity firm KKR & Co LP KKR.N for an undisclosed amount.

Reporting by Liana B. Baker in New York; Editing by Sandra Maler