Aleks Corp., a spin-out of University of California, Irvine, looks poised for growth under new owner McGraw-Hill Education, one of the biggest education publishers in the world.
McGraw-Hill plans to put its global sales and distribution system—it sells products in some 60 languages—behind Aleks’ core “adaptive learning” software. The increasingly popular teaching method uses technology to help educators provide custom learning experiences.
The acquisition is on undisclosed terms and expected to close by October.
The Irvine-based company, launched by UC Irvine scientists, mathematicians, and software engineers in 1996, has steadily grown to some 150 employees without acquisitions and heavy investment. Its software currently has about 1.3 million users.
“Under McGraw-Hill, that’s going to be much faster,” said cofounder and Chairman Jean-Claude Falmagne, who carries the title of professor emeritus at UCI. “We may have five million students using it.”
Knowledge Spaces
Rather than using numeric test scores, the software is based on a theory known as knowledge spaces, which analyzes a student’s aptitude in any given course and then instructs the student on those subjects he or she is most prepared to learn.
“The more personalized you can make the learning experience, the more effective,” said Brian Belardi, a spokesperson for New York-based McGraw-Hill. “It’s been a big trend in education.”
McGraw-Hill has joined the trend and is seeking more ways to sell product offerings directly to students, according to Belardi.
The company will continue to market and distribute Aleks’ software as a stand-alone product in the near future and then gradually integrate it within its vast catalog of offerings.
The companies’ ties date back a decade ago when McGraw-Hill, then part of McGraw-Hill Cos., began distributing Aleks’ software primarily to colleges and universities.
Chief Executive R. G. Wilmot Lampros will join McGraw-Hill, which plans to keep the company’s Irvine office largely intact.
The effort at McGraw-Hill to sell directly to end-users has become a bigger priority this year, following its $2.5 billion sale in March to New York-based private equity firm Apollo Global Management LLC.
The Aleks deal is the first for McGraw-Hill under Apollo’s ownership and follows some recent declines.
McGraw-Hill Education, which employs about 5,000 globally, saw revenue drop about 9.6% to approximately $1.6 billion in the nine months through September 2012 compared to the same period in 2011, according to the last figures reported before its sale.
Operating profits hit $245 million, down 12.8%.
Aleks’ humble beginnings resemble other university startup stories. It began with a five-person team working around the clock to fine-tune a product steeped in theory, not necessarily commercial applications.
Federal Grant
The company relied on a $2.4 million grant from the National Science Foundation to get off the ground and has not taken other investments since then.
It took Falmagne, a clinical mathematician by trade, and colleagues more than a decade to develop the software.
The product is offered for math, science and business courses and can be tailored for students of any age.
“In 45 minutes we know exactly what the student knows, and more importantly, we know what he’s capable of learning at that time,” Falmagne said. “It’s very successful.”
Aleks’ prospects under McGraw-Hill could bode well for UCI, which receives annual royalties from got Aleks’ software sales under a licensing agreement forged in 1997.
Last year UCI got about $500,000 in royalties from sales, according to a school spokesperson.
“The royalties are going to increase tremendously,” Falmagne said.
