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Is international education an investment hotspot?

“International education is considered to be ‘economic cycle neutral’,” she explains. “Very simply, this means that when markets go down, education is seen as a good investment for the future. When markets go up, people have more money and continue to choose to invest in education. It really can be a safe haven for investors, providing companies are delivering on their targets.”

“Investments can go down as well as up, but right now the education space is one of the most attractive for investors"

Sector challenges

Such endorsements show the confidence in the sector, but there are still risks to consider. Immigration rulings and currency fluctuations have slowed enrolment in Australia in the last few years, knocking 15% off sector revenue in 2011 (a haircut of AUS$2.7 billion). And recent visa curbs in the UK have impacted on non-EU business for private language teaching operators, although EU business continues to flourish.

Accreditation costs can be another challenge. According to Sue Blundell, head of English Australia, “Many of the Australian government policy changes in the compliance space over the last couple of years have resulted in increasing costs to providers – this has had an impact on really cutting into margins. Combine this with declining numbers of students and therefore revenue and you have a very challenging business environment.”

Similarly, the costs of quality inspections for private language schools in the UK have more than tripled since the government changed its rules on its endorsed accreditation bodies.

While such hurdles injure individual markets, they will not dent demand. International education is undoubtedly growing, even if market share between countries continues to tussle and flex. Says Jones: “Education institutions can be subject to external forces out of their control… Generally speaking though there is strong demand for international education which cannot be met by public providers and students will work hard to find the destination which suits their needs.”

“LSBF has always considered Asia as a region of key importance for international growth prospects”

This is good news, but also means a more competitive sector – one in which companies yolked to certain territories may have to work harder to survive. Increasing expansion, consolidation or strategic acquisition to ensure a global footprint is inevitable.

The OECD’s Education at a Glance 2011 report backs this up, highlighting the drastic reshaping of the international education landscape between 2000 and 2009 when a host of “new” study destinations such as Canada, Spain, Japan and Russia emerged. As Jones notes, if one country loses market share “then inevitably another country will pick it up.”

International education in flux?

The real game changer could be that the source of most demand – the developing world – raises its standards and begins to cater to a far greater proportion of its own market, diverting business from leading providers such as the US and UK. In the last few years a trend has emerged of Asian students seeking education within Asia, due to the rising costs of tuition in the West and increase of branch campuses.

Says Dushimova: “[LSBF has] always considered Asia as a region of key importance for international growth prospects. We opened a Singapore campus in June 2011, [and] we have very ambitious plans to grow that campus, expand our product offering, as well as expanding our business into China, India, potentially other countries in the region.”

Writing in the Assignment Report this May, Richard Taylor, an educational investment expert, noted the huge expansion of Indian education companies, several of which are likely to become significant players in the international market. Educomp, for example, is Pearson’s junior partner in providing vocational training in India but in future “could well become their biggest rival, or even perhaps their most important acquisition target” said Taylor.

As the market evolves, the companies that spread their bets globally look to have the most secure futures, while smaller, localised outfits will be more likely to suffer when challenges arise. That said, if governments recognise the opportunities that lie ahead and make policies accordingly, there’s no reason why the whole sector will not see good financial health for quite some time.

Key acquisitions in international education:

  • In 2007, CIBT Education Group Inc paid CAN$12 million for Sprott-Shaw Community College, the oldest and largest private career college in British Columbia with campuses across Canada and Asia. It is one of five subsidiary brands owned or co-owned by CIBT run across 18 countries.
  • In 2009 BPP was bought by US for-profit giant Apollo Group for £368 million via Apollo Global, its joint venture with the Carlyle Group. BPP managed to double applicant numbers for full-time degrees in 2011 as overall UK applications fell 8.7%.
  • Last September, German-based Sprachcaffe Languages Plus increased its worldwide network of language centres to 31 by buying the GEOS North America school.
  • In March 2011, Study Group International made its debut in the Canadian market by acquiring PGIC’s EFL centres in Toronto and Victoria for its Embassy CES brand. Study Group, which operates 41 campuses worldwide, is no stranger to acquisition. It was sold to Australian private equity company Champ and Petersen Investments in 2006, then to Providence Equity Partners LLC for AU$660 million in 2010.
  • In July 2011, student travel business TUI Education – a division of German travel giant TUI Travel  – bought English Language Centre (ELC) York. The move complements TUI’s growing portfolio of language schools which includes the EAC chain, Hampstead School of English and Manchester Academy of English
  • Maltese-owned EC English Language Centres bought three LSC centres in Canada last year gaining entry to Canada’s large ELT market. EC now has 15 schools on three continents.
  • Pearson, perhaps international education’s biggest player, entered the English language training market in China in 2008, acquiring Learning Education Center and Dellenglish whose centres number more than 27. It then purchased Wall Street English’s 39 centres in China in 2009 for $145million, before buying parent company Wall Street Institute for $92 million in 2010.

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