ACT Inc., the Iowa City-based company widely known for its standardized college admissions test, is transitioning much of its operation to a for-profit “public benefit corporation” after more than 65 years as a non-profit.
ACT is partnering with Nexus Capital Management, a California-based private equity firm, and “unifying” with Encoura, an educational “data science and research organization” owned by ACT, according to the company’s website.
The local company said the Nexus contributions will help students, educators, researchers and others.
A “public benefit corporation” is focused on a “double bottom line of financial and social impact,” according to ACT.
“The need to prepare learners for success after high school for both college and work has never been higher, nor has the need to ensure that every learner has access to equitable college and career planning resources, guidance, and insights,” ACT CEO Janet Godwin said in a statement. “Partnering in this way will complement and amplify ACT’s proven platform of education and work readiness solutions to support the needs of students, educators, and employers alike.”
ACT was created in 1959 in Iowa City by a University of Iowa duo. Education professor F. Lindquist and U of I registrar and director of admissions Ted McCarrel wanted to shake up the college admission testing industry by shifting focus toward academic achievements and away from strictly test-taking.
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Partnership intends to enhance student preparation for college, careers
The private equity investment with Nexus will provide ACT “with the scale and capital necessary to deliver on its promise of education and workplace success,” ACT Board of Directors chairman Daniel Domenech said in the statement.
A primary goal is to enhance “holistic readiness credentials and more precisely connect students and job seekers to institutions of higher education and employers.” Specific details were not provided.
ACT’s for-profit model and new data analysis intend to “simplify and streamline” the college application process, which they feel will “better match employers with available talent, create new opportunities for upskilling mid- and late-career professionals.”
Some of the private equity money will be funneled to a yet-to-be-named non-profit organization headquartered in Iowa City that “will conduct programs, services, and research focused on education and workplace success.”
Student resources will not be impacted by the private equity transition. ACT has said testing prices will remain unchanged, and all services provided by its organization and Encoura will remain operational.
“As a result of this investment, we will help more students be ready for their postsecondary paths and help more adults advance in their careers,” Godwin said.
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Private equity investment comes after year of downsizing
ACT’s Iowa City operation has shrunk considerably in the past year.
It comes even as colleges and universities across the country have remained standardized test-optional in their admissions process, according to the National Center for Fair & Open Testing. Many students still opt to take the exams.
The organization laid off 106 employees last summer, including 40 of the 310 people employed at the Iowa City location.
Those cuts came after three straight years of operating losses in the millions. ACT was $12 million in the red in fiscal 2022 after posting more than $6 million in losses the previous year, CNN reported. The company lost $60.5 million in fiscal 2020, the Press-Citizen reported.
ACT also announced it was shifting operations off-site and selling its sizeable east Iowa City campus, a cost-saving adaptation to employee behavior. Many of ACT’s Iowa City campus employees are now working from home since the pandemic, following a national trend.
Ryan Hansen covers local government and crime for the Press-Citizen. He can be reached atrhansen@press-citizen.com or on X, formerly known as Twitter, @ryanhansen01.
