Not surprisingly, private education operators with international intakes are becoming increasingly attractive options for private equity firms and corporates seeking judicious investments or economies of scale.
Companies offering higher education – either in affiliation with public universities or granting degrees themselves (such as BPP) – and other types of education, such as further/vocational (Sprott-Shaw Community College in Canada, Carrick Education Group in Australia), high school, language and pathway (Cambridge Education Group) are all appearing on the radars of eagle-eyed investors.
Consolidation is becoming commonplace, particularly in the global language teaching business where there are many high quality independent operators. Previously in The PIE News, we listed seven major acquisitions in 2011 alone, including travel giant TUI buying into the language school business in the UK and one major player, Sprachcaffe, swallowing up the ailing North American language school chain GEOS.
The scale of deals is also beginning to astound. A recent Times Higher Education article on the UK’s private HE sector noted that in 2009, BPP – income listed as UK£49 million – was bought by US for-profit giant Apollo Group for £368 million via Apollo Global, its joint venture with the Carlyle Group, a private equity firm.
“Investments can go down as well as up, but right now the education space is one of the most attractive for investors,” says Chris Eden, Senior Vice President International Development of Wall Street Institute, which was bought by Pearson for $92 million in 2010.
Rod Jones, CEO of Navitas, agrees, having seen his company’s share price rise fourfold since IPO in 2004. “Obviously we believe that education is an investment area with significant opportunity,” he says, citing the growth of English as a world language, quality of education in established markets and improving wealth in developing countries as drivers.
What are investors looking for?
Jason Katz, Director of Kings Park Capital in the UK, says his private equity fund is backed by senior investors from across the global travel and leisure sector. His interest is in the language school sphere, more closely allied with his leisure/travel industry experience.
“The educational travel segment appears to be fragmented with a high degree of family ownership”
“We target businesses that combine resilience with attractive growth prospects,” says Katz. “In the travel sector, specialist travel businesses are most favoured as they provide a niche rather than a mass market offering and as such have higher barriers to entry and typically generate higher margins. We believe the international education sector exhibits similar positive fundamentals.”
He agrees that the high degree of fragmentation in the language school sector (particularly in the UK) means a perfect opportunity for investors. “The educational travel segment appears to be fragmented with a high degree of family ownership. This makes it attractive for a private equity investor looking to back a capable management team in a “buy and build” strategy,” he says.
One such family business, UK-based LSBF, has seen powerful growth since its launch in 2003. The firm, which offers degrees and professional qualifications in business and finance, as well as running a language teaching school, has opened campuses in London, Birmingham, Manchester, Toronto and Singapore. In the last two years it has enjoyed more than 50% year-on-year revenue growth.
Madina Dushimova is Director of Strategy at LSBF, with a background in investment banking. She tells The PIE News that given LSBF has further international expansion in its sights, it is considering working with an investment partner in the future. [more>>]