Corporate Learning & Development: Boring or Breakout?

The $250B Corporate L&D market was rattled by COVID and it changed overnight. COVID and changes in the labor market conditions have caused a major shift in L&D spend. While overall L&D budget growth is limited, there is still $250B in spend that is in flux. The shift has focused budgets on technological upgrades and digitally enabled, remote L&D experiences. Almost all of what was offline went online and it’s largely not going back. Capital and M&A show strength as change drives opportunity for investors and buyers. Capital sored by 3x in 2021, fueling a wave of new companies, before falling back to 2020 levels in 2022. M&A jumped to $18B in 2021 with a shift in the L&D landscape and more attractive multiples driving mega PE platform deals. M&A has continued at a fast pace in 2022, on track for $9.5B and over 100 transactions for the second consecutive year.

Coming out of the pandemic, macro tailwinds have largely reversed into headwinds. Organizations are reevaluating their budgets for 2023 and cutting back on discretionary spending. Valuations flew to 14x trailing revenues and pulled within 20% of broader software multiples. Valuations have plummeted to 2.4x and now trail software multiples by more than 50%. That said, private markets are hanging tough with capital raising remaining above its pre-COVID level despite dropping ~60% YoY. M&A deal volume is down just 9% amidst a broader tech market slump.

While the L&D space is mature and slow-growing from a TAM standpoint, we believe it is still early days for how L&D budgets are spent. Better data will drive a closer assessment of learning impact and only 25% provide more than a basic level of personalization. The landscape remains fragmented, and we expect a second wave of consolidation to drive M&A volume.

‍