Tutoring company Educate (NASDAQ:EEEE) went public at $11 a share two years ago. Since then, the stock has been a horror for investors, plunging below $6 by July. Now, management and a private equity firm, Sterling Capital Partners, have made an offer to buy the company at $8 per share. While other bidders may come to the table, it's probably a good idea to be wary of the stock.

Educate is a rollup that was led by another private equity firm, Apollo Advisors LP. A rollup is when one company buys a variety of other firms in its sector. This strategy is often used by private equity-backed companies to try to bulk up the operations.

Educate focuses on educational and tutoring services for pre-kindergarten kids through twelfth-grade students. Their umbrella encompasses Sylvan, which has a network of learning centers, and Hooked on Phonics, which is a well-regarded reading system.

In the second quarter, Educate posted an 11% increase in revenues to $102.5 million. However, net income fell from $10 million, or $0.23 per share, to $4.3 million, or $0.10 per share. Basically, the company has had difficulties containing operating expenses. What's more, management indicated that there is likely to be continued weakness for the rest of 2006.

Besides Sterling Capital Partners, the other buyers of the company include several senior executives of Educate, including CEO Christopher Hoehn-Saric. Even though the company has been beset by problems, management clearly thinks that the long term looks bright. Why else buy the company?

The business does have some strong competitive advantages, such as leading consumer brands, significant market share, a portfolio of educational products, and longstanding school relationships.

Thus, investors seem to think another bidder may come to the table. After all, shares are trading around $8.09, above the current buyout offer. Possible suitors include competitors like Kaplan, which is part of Washington Post (NYSE:WPO).

But investing in the stock right now is really taking a gamble. And, given the current difficulties with the business, you'd be paying a premium for those troubles.

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Fool contributor Tom Taulli does not own shares mentioned in this article. The Fool's disclosure policy is at the head of the class.