The ACT’s recent connection to a private equity firm is causing concern.

Private equity firms have strengthened their presence in the American economy, but they haven’t succeeded in gaining the trust of the general public, especially after the closure of numerous Red Lobster restaurants owned by one such firm earlier this year.

A significant private equity deal involving ACT, the nonprofit testing company administering the college admissions exam to hundreds of thousands of high school students annually, went unnoticed a month before Red Lobster’s bankruptcy filing.

Nexus Capital Management, an investment firm based in Los Angeles, acquired ACT, leading to the organization’s transition to for-profit status without altering the cost of the ACT exam, which ranges from approximately $70 to $100.

“We are committed to our mission,” affirmed Janet Godwin, ACT’s CEO, emphasizing that the move will allow the company to expand while remaining dedicated to student success.

The acquisition of ACT by Nexus Capital amid concerns about the increasing influence of private equity in various industries has raised questions about potential impacts on students amid a changing landscape of standardized testing.

The decision of ACT to become a for-profit entity has stirred unease, with skeptics citing potential profit-driven motives as a cause for concern.

What is private equity?

Private equity firms typically acquire companies, often with significant debt, and make strategic changes to enhance profitability before selling them to generate returns for investors.

While private equity’s expansion into the standardized testing market is not surprising, ACT’s shift to a for-profit corporation has raised eyebrows, with implications for transparency in the future.

ACT’s transformation has drawn criticism for altering the organization’s social purpose and raising concerns about the potential lack of transparency in financial reporting.

‘Not who Nexus Capital is’

Emphasizing the need for new product development, ACT’s CEO asserts that partnering with Nexus Capital was crucial and aims to dismiss concerns about profit-driven motives.

While ACT highlights Nexus Capital’s commitment to long-term growth and shared values, critics, including the American Federation of Teachers, suggest potential ethical issues arising from the private equity investment.

Despite ACT’s reassurances, concerns persist about how the acquisition will impact the company’s operations and the students it serves.

Test-optional movement persists

The standardized testing landscape has evolved significantly following widespread test-optional policies adopted by colleges and universities due to the pandemic, indicating a shift in admissions requirements.

ACT incurred substantial financial losses amid pandemic disruptions, prompting reflections on the future of standardized testing and the role of major test providers like ACT and the College Board.

What’s next?

Gary Berger, an assistant principal, anticipates potential changes in testing practices following ACT’s acquisition, focusing on enhanced accessibility for students.

Concerns about data ownership shifting from a nonprofit to a for-profit entity raise questions about accountability and transparency, echoing worries expressed by education advocates and professionals about the implications of such a transition.

Marie Bigham, a college admissions advocate, echoes concerns about private equity’s impact on ACT’s operations and its potential repercussions on students and the education landscape.