Growth and Innovation: Online Delivery, the SAT Rebound, and the Skills Gap in Exam & Test Preparation

The exam preparation industry is the set of services and products sold to improve performance on standardized exams. It sits inside the broader tutoring and test preparation market, which also covers more generalized academic support, and it serves three distinct customers: K-12 students, college students preparing for higher education exams, and working professionals pursuing degrees or skills. COVID-19 suppressed demand in 2020. The category rebounded quickly and came back a different business.

The difference is delivery. Online services generated 65% of all industry revenue in 2022, against 58% in 2020, and the shift is expected to continue through 2028 as analytical tools improve both cost and time efficiency for students. Two demand engines are pulling in the same direction: a college admissions process that got more competitive, not less, after schools briefly dropped testing requirements, and a corporate skills gap that has professionals paying for certifications on their own account. Deal volume followed, running above pre-pandemic levels with 19 transactions in 2022 and 12 more through August 2023.

Exam Prep Industry at a Glance

What the Industry Covers

Divided by product type, services for college placement exams such as the SAT and ACT make up the largest segment at about 50%, followed by certification exams at 20%, high school exams at 10%, and elementary exams at 10%. Delivery spans self-paced online, online tutoring, classroom coaching, and hybrid models. Geographically the industry is highly concentrated in North America, a function of testing conventions in the region and the presence of major players such as Kaplan and the Princeton Review. The category is broadly characterized by low volatility, high profit margins, and a highly competitive landscape.

Growth drivers are straightforward: rising college application and enrollment rates, a growing number of K-12 students, improving broader economic conditions, and increasing use of analytical tools within the industry.

Market Size and Growth

The tutoring and test preparation market in the U.S. is forecast to grow from $3.5 billion in 2022 to $5.1 billion in 2028, a 6.2% CAGR. Exam preparation specifically is expected to grow faster, at a 7.1% CAGR, which implies exam prep taking share within the broader market. Alongside that, the mix keeps moving online, and the report expects that trend to hold through 2028.

Industry Highlights

The SAT Rebound in College Admissions

In 2020 many universities, including the Ivy League and state schools, lifted their standardized testing requirements through the class of 2023. That raised the question of whether standardized tests were falling out of favor. COVID-19 appears to have had the opposite effect, underscoring how much admissions offices and students rely on these tests. The Massachusetts Institute of Technology reversed its suspension early, citing standardized tests as a crucial tool for assessing the academic preparedness of applicants.

Rising tuition, plummeting acceptance rates, and an increased wage premium on college degrees are all contributing to demand for SAT and ACT preparation. Students and parents invest in exam preparation hoping to leverage strong scores for scholarships or merit aid and to differentiate themselves in a competitive applicant pool. The SAT reported an increase in test takers for the class of 2022, from 1.5 million to 1.7 million, and as acceptance rates at elite universities fall to low single digits that demand should continue.

Survey data explains why the category holds up. Standardized tests were a major factor for 40% of admissions decisions in 2022 and a minor factor for another 46%, meaning they carried weight in 86% of cases. Only high school grades ranked higher.

The Skills Gap Drives Demand for Continued Education

Demand for professional exams and certifications has increased significantly in recent years, making it the fastest growing sector of the exam prep industry. The driver is growing recognition of the corporate skills gap, an employment and economic issue spanning many industries that the pandemic brought to a head. Rapid job turnover exposed the distance between the skillsets the labor force currently holds and the ones it will need.

Those gaps, combined with the rapid development of edtech, have increased demand for upskilling programs and professional certifications among both businesses and consumers. Delivered online, certifications give full-time workers flexibility without the expense or time of an additional degree, which makes them appealing across a wide range of industries. Revenue in the professional certificate market is projected to reach $5.33 billion by the end of 2023 and $7.89 billion by the end of 2027, a 10.3% CAGR.

M&A Overview

M&A volume growth in the exam prep market exceeds pre-pandemic levels, with 19 relevant deals in 2022 and 12 deals through August 2023. Deal volume was expected to slow in the third and fourth quarters of 2023 on lending conditions, which is a financing constraint rather than a demand one.

The pattern in the transaction record below is consolidation by specialists rather than opportunistic entry. CeriFi appears four times across financial licensing, tax and accounting, risk certification, and insurance pre-licensing. UWorld appears three times, building from bar review into pharmacy and accounting. Blueprint appears three times across medical education. Alpine Investors appears three times in IT certification, engineering exam prep, and professional learning. Sponsors are assembling credential-specific platforms and then adding adjacent test categories onto the same delivery infrastructure.

Navagant Case Study

Navagant served as the exclusive sell-side advisor to APEX Anesthesia Review on its sale to TrueLearn, a portfolio company of LLR Partners, in December 2022. It is the transaction in this report closest to our own practice.

Notable Transactions

April 2023: Training The Street, a leading provider of educational resources for financial professionals, announced its second add-on acquisition within two years by acquiring The Marquee Group. Based in Canada, The Marquee Group provides financial modeling training intended to help professionals and organizations apply the discipline of financial modeling to improve decision-making, offering financial consulting, accreditation, and modeling training through courses, webinars, and online coaching. Both companies will maintain their current brand names, and the deal was not expected to drive significant internal change in either organization. Ian Schnoor, founder of The Marquee Group, continues as an instructor and advisor. The funding was facilitated by Falfurrias Capital Partners, the Charlotte-based private equity firm that acquired Training The Street in June 2021 and supported its purchase of London-based AMT Training later that year. Financial terms were not disclosed.

March 2022: Colibri Group announced the acquisition of Becker Professional Education. Becker is a global leader in Certified Public Accountant exam preparation and offers exam preparation products across accounting, continuing professional education, and Certified Management Accountant exams. It has been a trusted source of review for students and professionals pursuing CPA licensure for more than 60 years and serves partners in nearly 40 countries, including the top 100 accounting firms in the United States. Colibri Group is a professional development firm offering licensing courses, upgrade education, and certification programs. The acquisition added accounting, mortgage, and governance, risk and compliance education to its portfolio. Becker was one of three large education and training acquisitions Colibri completed in 2022, alongside OnCourse Learning and the Association of Certified Anti-Money Laundering Specialists.

Public Company Data

The comparable set mixes publishers, learning platforms, and tutoring operators, and the trading range reflects that spread. Coursera carried the highest revenue multiple at 4.2x on 23% growth but negative EBITDA, while Graham Holdings traded at 0.9x revenue and 5.1x EBITDA. Four of the nine names posted negative LTM revenue growth, and three had EBITDA too small to produce a meaningful multiple. Median EV/Revenue of 1.6x and median EV/EBITDA of 7.2x are the more useful anchors.

Select Transactions

The table below covers exam and test preparation transactions from January 2020 through June 2023, spanning college placement and K-12 tutoring, professional licensing and certification, medical and clinical exam prep, legal review, and insurance and financial credentialing. Valuation and multiples are shown where disclosed. Rows marked CF had confidential terms, and highlighted rows are Navagant transactions.

Buyer Universe

Our team has long-standing relationships with many of these firms through recent transactions in the Education and Training industry. We also track buyers that have been highly acquisitive in exam preparation, particularly those completing notable M&A transactions. That sector expertise and network gives us insight into this buyer universe and into the growth drivers for the companies within it.