Folsom-based PowerSchool to be acquired by private equity firm Bain Capital for $5.6 billion

PowerSchool, the powerhouse educational software company based in Folsom, has agreed to be acquired by Bain Capital in a deal worth $5.6 billion, the companies announced Friday.

The purchase will earn shareholders of the capital region’s largest publicly-traded company $22.80 a share when the deal closes later this year.

Bain executives said in a joint announcement that PowerSchool provides “significant opportunities to expand” amid a surge of cloud-based and so-called software-as-a-service K-12 educational technology. The company already provides service to 17,000 schools and other educational institutions with access to 55 million students across 90 countries.

PowerSchool’s products help teachers and administrators manage student data, including attendance, grades and homework assignments. The COVID-19 pandemic helped drive software sales as schools scrambled to adapt to distance learning.

“PowerSchool’s innovative software solutions in and out of the classroom provide a strong foundation for K-12 academic success,” said David Humphrey, a partner at Bain who runs the Boston-based private equity group’s technology, media and telecommunications investments. “Their products are highly respected by administrators, educators, students and parents because they foster active collaboration and offer actionable insights needed to support positive learning outcomes.”

Officials say little will change in the day-to-day operations of PowerSchool, which was founded in the late 1990s and was sold to Apple in 2001 for $62 million. Apple sold the business five years later to British publisher Pearson PLC for an undisclosed price. In 2015, around the time it moved its headquarters to Folsom from Rancho Cordova, the company was spun off by Pearson to a group led by two private equity firms.

Hardeep Gulati, the company’s chief executive officer, said the deal will provide “additional resources and the flexibility to deliver even more growth and innovation.” He specifically cited that the deal would help the company with their AI platform, PowerBuddy, and with global expansion.

Gulati, who has been CEO of PowerSchool since 2015, recently told the Sacramento Business Journal that the company could reach $1 billion in annual revenue by 2027 leveraging its subscription-based software.

PowerSchool employs 3,000 workers around the world, including 500 in Folsom. Despite the company’s growth during COVID and through multiple acquisitions, its first-quarter losses this year were nearly $20 million, a 65% decline from the previous quarter, on revenue of $185 million. Last year’s revenue totaled $182.1 million, a 13% year-over-year increase.

According to the companies, the per-share sales price represents a 37% premium over PowerSchool’s share price of $16.64 as of May 7, the day before reports in the Wall Street Journal surfaced that PowerSchool and Bain were in talks for a purchase. Two investment firms that created the company in 2017 — Vista Equity Partners and Onex Partners — will continue to have a minority stake in the business, officials said.

PowerSchool Holdings was one of the few companies in the capital region to make a splash on Wall Street in recent memory when Gulati took the company public in 2021. Its initial public offering, or IPO, was the largest in years for a company based in the Sacramento area — and a boon for the region’s small tech community.

The company debuted on the New York Stock Exchange nearly three years ago at $18 a share and raised $710.5 million under the ticker symbol PWSC.

An IPO is a milestone for any company, let alone one from the Sacramento region where long-held beliefs say it’s a difficult place to do business for technology companies.

“We have definitely proven that wrong,” Gulati said. “We have grown the business as well as thrived. ... This is a testament to Sacramento.”

As PowerSchool goes private, only seven public companies based in the region remain publicly traded, according to the Sacramento Business Journal, after Alto Ingredients, formerly known as Pacific Ethanol, pulled up stakes last year for Illinois.