Riverdeep goes on an acquisition binge with Credit Suisse money. Bain Capital backs a new guy for Princeton Review. K12 announces an IPO led by Morgan Stanley.

Readers of edbizbuzz.com and SIIW • The Podcast listeners know that it's all part of a restructuring process that's been building for many months - especially in the upper reaches of education industry valuation. (See here and here.) Call it part of a trend.

Every fashionista knows that by the time anything gets called a trend, the trendmakers have moved on, leaving the space to developers, poseurs and tourists.

This may explain how your editor woke up this midnight in empathy with Bill Murray's distinctly declasse character in Groundhog Day.

In retrospect, a spate of investment in k-12 signalled the end of the "new economy" investment boom of the 1990's. All that pre-millenial dot.com wealth generated by irrational exhuberence had to find the next new thing, venture capital ran out of good investments in the internet it was thought to understand, and a pack of its managers crossed the boundary of their subject matter competence into the new education economy. Many school improvemnent providers benefitted, but not so many investors or entrepreneurs.

Are we seeing a post-millenial repeat at the beginning of the end of the boom in private equity? Have the really good deals in the domestic economy been done? Is risk capital, re-labelled as private equity, once again flush with cash raised on the basis of yesterday's success, and is the same class of money managers once again stepping onto the bleeding edge of its expertise? 

If this is not a matter of more good cash looking for big investments than good big investments deserving cash, do the investment managers finally have the pulse of an objectively new education economy? Have they learned the lessons of their last round? Are these guys that much smarter than the folks who raised education investment funds just a few years ago and immediately got burned on SES? Are the rewards they suggest to investors really equal to the risks?  Looking back on this ten years out, how much of this investment strategy will be about the fees generated by the transactions, as now seems to be the case when we review the end of the last episode?

Enough generalities....

• Is Riverdeep Hougton Harcourt likely to be more than the sum of its parts by enough of a margin to justify the opportunity cost for investors?

• Are better disciplined managers and more money all that's needed to reinvigorate Princeton Review?

• Is online public schooling amenable to a virtual Edison, is the online EMO business model vastly more promising than its onsite predecessor, and can K12  move far beyond the base it built with polical connections before government purchasing in public education came under scrutiny?

Until one of the investment managers behind these deals makes a far more clearly articulated investment thesis than what can be inferred from the happy-faced press releases of recents days and even months, your editor will remain sceptical that the strongest rationales for these moves aren't the fees, the structural imperative of large investment firms to do large deals, and the desire to keep the investment pool rather than return some of the money (where it might eventualy find its way to smaller but more promising opportunities in k-12?)

A last thought. Your editor gets the sense that these investment proposals are never seriously scrutinized by knowledgeable outsiders, let alone outside bears. Once the managers of other peoples' money make the commitment to work with an investee, the process is in real danger of falling victim to bullish "group think."  It does not appear that these proposals are subject to the "murder board" process of high-risk military planning, or that there are many in the managerial community willing to play something like the part of General Shinseki in events leading up to the invasion of Iraq. But rather than developing the not exactly prefunctory, but still usual, list of risks, don't the money managers fiduciary obligations demand some kind of "Team B" competitive analysis as part of the process leading to very high risk investments?

And if it doesn't seem to be a good idea to them today, won't it be a nice argument for the complaints filed in disappointed investors' lawsuits tomorrow? 

von Clauswitz said: Critical analysis is not an evaluation of the means actually employed, but of all possible means. One can, after all, not condemn a method without being able to suggest a better alternative. So, if investors want to take out insurance against the possibility noted above, spending some money on the benefit of outside reviews and the associated documentation would be smart . Their investment product would almost certainly be improved. Your editor thinks it would help the industry, too, by nudging the investment culture from conceptual trendiness and pack investment - building on what the last guy did until the copying of copies process yields an unintelligible version of an initially great idea (and then watching the failures discredit that good idea), to the merits of the investment case - and so in towards the smaller investments in smaller firms with a better risk-return profile. (See Education Capital founder Bill Bavin's column in the November 14, 2006 issue of New Education Economy® attached below.) 

edbizbuzz would be more than happy to participate in the process.