Private equity giant Bain Capital is said to be considering an acquisition of education software provider PowerSchool Holdings (NYSE: PWSC). Investors are cramming to get in ahead of a potential deal, sending PowerSchool shares up 20% as of 10:30 a.m. ET.

Is PowerSchool going private again?

PowerSchool provides a cloud-based software program used by 55 million students at 17,000 North American schools and school districts, serving as a clearinghouse to track grading, attendance, registration, and other tasks.

The Wall Street Journal says that Bain is in talks to take the company private in a deal that would value PowerSchool at about $6 billion, including its $1 billion in debt. An agreement like this would offer significant upside to PowerSchool’s $3.4 billion market capitalization heading into trading Wednesday.

PowerSchool is no stranger to private equity. The company was spun out of Pearson to Vista Equity Partners in 2015, going public in 2021. Vista and another private equity firm, Onex, still own stakes in the company.

Is PowerSchool a buy on the merger reports?

PowerSchool also posted first-quarter results yesterday evening. The company grew revenue by 16% year over year and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 24%, but it missed Wall Street’s consensus earnings estimate on a per-share basis.

This is a solid business even without a deal, but with the merger speculation now priced into the stock, investors should be cautious about buying in right now.

If a deal does not materialize, the stock will likely return to its pre-report levels, providing a better entry point. And if a buyout does happen at the rumored price, much of the premium Bain would pay is already factored in.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Pearson Plc. The Motley Fool has a disclosure policy.