Parchment Acquisition: Key Details, Impact, and What Comes Next

Instructure has completed its acquisition of Parchment, the world's largest academic credential management platform. This strategic move is set to significantly expand Instructure's customer base and enhance its market-leading teaching and learning ecosystem. By integrating Parchment's capabilities, Instructure aims to offer a comprehensive digital passport of achievement records, benefiting learners, institutions, and educators alike.

What Is Parchment?

Parchment provides secure and reliable end-to-end credential support, offering services such as issuing transcripts, diplomas, digital badges, and certificates. The platform also manages records, verifies credentials, and supports student mobility solutions. Parchment's unique selling points include a comprehensive all-in-one platform, strong security and privacy measures, and the largest interconnected network of educational and professional entities. Additionally, its digital-first approach and global reach make it a leader in international credential management.

Who Acquired Parchment?

Instructure is a leading provider of educational technology solutions, playing a significant role in enhancing teaching and learning experiences across K-12, higher education, and professional education sectors. Key products include Canvas LMS, which simplifies teaching activities, Mastery for high-quality assessments, Impact for maximizing edtech usage, and Intelligent Insights for AI-powered educational data analysis. Instructure is recognized as a market leader, particularly for its Canvas LMS, serving millions of users and earning multiple awards.

When Was Parchment Acquired?

Instructure completed its acquisition of Parchment on February 1, 2024. This move aligns with industry trends emphasizing digital credentialing and lifelong learning. The acquisition comes at a time when the education technology market is expanding rapidly, with companies seeking to offer comprehensive digital solutions. By integrating Parchment's credential management capabilities, Instructure aims to provide a seamless, lifelong record of academic achievements, catering to the growing demand for flexible and verifiable learning pathways.

Why Was Parchment Acquired?

• Market Expansion: The acquisition of Parchment is expected to significantly expand Instructure's existing customer base and unlock exciting new growth opportunities. Parchment has over 13,000 customers and has exchanged more than 165 million credentials over two decades. The combined entity will open an estimated $2 billion in Total Addressable Market (TAM) across high-growth categories.
• Technology Integration: By adding Parchment to the Instructure Learning Platform, Instructure will provide a verifiable and comprehensive digital passport of achievement records and outcomes for learners. Parchment's platforms, including Award, Digitary, and Pathways, will be integrated to enhance the credentialing capabilities of the Instructure platform. This integration aims to offer flexible lifelong learning experiences and a seamless, connected experience for users.
• Competitive Advantage: By acquiring Parchment, Instructure enhances its ecosystem, enabling customers to navigate skill mastery, transfer credits, and provide proof of prior learning. This positions Instructure as a more comprehensive solution provider in the education technology market, potentially increasing its appeal to both traditional and non-traditional learners. The combination of Instructure and Parchment will create a market and category-leading provider, enhancing Instructure's competitive position in the education technology market.

Acquisition Terms

• Acquisition Price: The transaction is valued at approximately $835 million, with a net purchase price of approximately $795 million after accounting for a tax benefit.
• Payment Method: Instructure plans to finance the transaction with cash on hand and incremental debt under its existing credit facility.
• Key Conditions or Agreements:
  • The transaction is expected to close in the first quarter of 2024, subject to regulatory approval and customary closing conditions.
  • Parchment is expected to contribute approximately $115 million of revenue in 2024.
  • Instructure is expected to benefit from Parchment's highly stable and recurring revenue, with strong gross retention metrics in the mid-to-high 90s.
  • The transaction includes anticipated run-rate cost synergies and is valued at approximately 16 times Parchment's expected 2024 Adjusted EBITDA.

Impact on Parchment

The acquisition of Parchment by Instructure brings significant changes to operations and management. Parchment will be integrated into Instructure's existing ecosystem, enhancing its credential management capabilities. This merger aims to provide a seamless digital passport of achievement records for learners, facilitating skill mastery, credit transfers, and proof of prior learning. The operational shift is expected to unlock new growth opportunities and expand Instructure's customer base, aligning with their mission to offer comprehensive lifelong learning experiences.

Regarding product offerings, Parchment's services, including issuing transcripts, diplomas, and digital badges, will now be part of Instructure's platform. This integration promises a more robust suite of services, benefiting both traditional and non-traditional learners. Employee reactions have not been detailed, but the merger is expected to bring together talent from both companies, fostering a positive outlook. Customer reactions are anticipated to be favorable, given the enhanced value and support for Parchment's products. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly.