EducationInvestor Global April/May edition

EducationInvestor Global April/May 2020 vol 12 • no 3

essential reading for education companies worldwide

Not even close Investors forecast months-long dry spell as deal volume dives

Pyramid scheme?

New ways for harder days

Silver linings

Egypt caps foreign investment in private schools

Pandemic-battered pathways sector requires digital disruption

Covid-19 will catalyse long-term ed tech investment

infrastructure

• ICT • outsourcing • academies • schools • colleges • nurseries • universities • policy

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UP FRONT MANAGING DIRECTOR Vernon Baxter – +44 (0) 20 7104 2001 vernon.baxter@investorpublishing.co.uk EDITOR Josh O’Neill – +44 (0) 20 7451 7069 josh.o’neill@investorpublishing.co.uk DEPUTY EDITOR Simone Rensch – +44 (0) 20 7451 7061 simone.rensch@investorpublishing.co.uk REPORTER AND SUBEDITOR Charles Wheeldon – +44 (0) 20 3762 2556 charles.wheeldon@investorpublishing.co.uk HEAD OF SALES Michael Dee – +44 (0) 20 7104 2006 michael.dee@investorpublishing.co.uk SALES MANAGER Carlo Menezes – +44 (0) 20 7104 2002 carlo.menezes@investorpublishing.co.uk SALES MANAGER Grace Mackintosh – +44 (0) 20 7451 7067 grace.mackintosh@investorpublishing.co.uk DELEGATE SALES & ADVERTISING EXECUTIVE Sohail Iqbal – +44 (0) 33 0052 6190 sohail.iqbal@investorpublishing.co.uk DELEGATE SALES & ADVERTISING EXECUTIVE Shakil Ahmed – +44 (0) 20 7104 2005 shakil.ahmed@investorpublishing.co.uk SENIOR EVENTS MANAGER Nicola Jones – +44 (0) 20 3746 2613 nicola.jones@investorpublishing.co.uk PRODUCTION MANAGER Jeremy Harvey – +44 (0) 20 7451 7053 jeremy.harvey@investorpublishing.co.uk DESIGN & PRODUCTION EXECUTIVE Craig Williams – +44 (0) 20 3762 2254 craig.williams@investorpublishing.co.uk PUBLISHER Harry Hyman FOLLOW US ON TWITTER @EduInvestor

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EducationInvestor Global • April/May 2020

Going viral The global education sector is bracing for disruption. Companies that stand still will succumb to Covid-19

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sk any investor what they like about education and there’s a good chance she or he will point to the industry’s ability to weather even severe recessions. That, and the “robust fundamentals” underpinning the market, which afford businesses within it almost unparalled revenue visibility. An operator of an all-through school, for instance, may from a single student collect tuition fees three times a year for 18 years, should they join in nursery and stay until sixth form. Talk about sticky business.

But the Covid-19 pandemic has uprooted the foundations underpinning this school of thought. Global economies, fast approaching the deepest recession since the 1930s, are imploding, taking with them millions of jobs and thousands of businesses – and counting.

As a result of constrained finances and insurmountable operating conditions, private schools are folding (see page 15), universities are on the brink of bankruptcy (see page 12) and large tuition providers worth hundreds of millions of dollars are winding down in key markets (see page 12). No one saw this coming in December. And when the virus was discovered a month later, few thought things would get this bad.

Education is indeed resilient to recession; when a country’s economy contracts, many citizens upskill or reskill to meet the evolving needs of the labour market. But this is not a ‘normal’ recession. Global work forces are paralysed. Hundreds of millions of people are confined to their homes. Governments across the world are collectively burning through trillions of dollars to keep economies afloat and mitigate job losses. But it’s still not enough.

Businesses in our sector are crumbling – and the worst could be yet to come.

Global economies in the coming months are poised to contract severely – UK gross domestic product could plunge 20%, credible forecasts suggest. When they do, once-solid market fundamentals will recalibrate. Parents will lose jobs and pull children from fee-charging schools. Corporations will see revenues plummet

and thus spend less on staff training overall.

Students on the cusp of adulthood will decide not to attend universities overseas (see page 13). International travel bans might prevent boarders from returning to school. And so on.

At present, a worrying number of education providers are unable to fulfil their functions.

Many of them may have short lifespans.

This period of temporary disruption will almost certainly manifest in permanent changes in the behaviours and attitudes of education consumers. Institutions most at risk to these shifts are those unable to rapidly pivot their strategies and remould entrenched delivery models. Think of your local prep school or nursery, or the family-run tuition centre in the middle of town.

Fragmented providers like these comprise huge portions of global education markets.

Investors know that the sector will not return to normal as we once knew it. Which is why, as our cover story unveils, private equity funds have put transactions on pause as they attempt to assess, and limit, the damage of this existential threat to their portfolio companies.

Investors, advisors and credit experts anticipate the most significant drop in deal activity of recent decades. They also expect vast sums of debt to be piled onto education companies in the form of crisis loans, for which demand in the UK has been so high that banks have signalled they are unwilling to finance acquisitions (see page 14). Whether businesses belonging to cash-rich buyout funds should be entitled to taxpayer-funded loans and grants is for you to decide as you read on.

Our politicians tell us that Covid-19 does not discriminate in who it infects. The virus does not choose its business victims, either. It will change almost every organisation in our sector, in some way. I just hope that positive change outweighs the bad. n

Josh O’Neill, Editor, EducationInvestor Global

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CONTENTS

news Exclusives Covid-19

Europe 6-9

A very private problem 34 The Covid-19 pandemic has thrown the UK education sector into a state of flux, as providers face a cash crunch that could prove fatal for some. Deal flow has dried up, and buyout houses with hundreds of millions of pounds invested in the market are bracing for widespread losses, writes Josh O’Neill

10-13

Early years

14

K12

15

Higher education

16

Vocational and skills training

17

Ed tech and educational services

18

News in brief

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global Path to the new way 20 The global pathways industry is a staid one in which face-to-face delivery models have remained largely unchanged for nearly three decades.

But since international travel bans have stemmed flows of foreign students, the sector is in dire need of disruption from online providers, argue Abhinav Mital and Amit Garga, co-founders of LINC Education

Pathways 20

A time to shine 24 Ed tech platforms are bridging a crucial gap between educators and learners amid widespread global closures that have severely disrupted brick-andmortar providers. A surge in uptake of online education will outlast the Covid-19 pandemic, writes James Local, managing director at investment bank Houlihan Lokey, who foresees significant long-term wins that should accelerate growth and investment in the sector Mapping global mobility 28 trends in education As the number of outbound students seeking an education abroad rises every year, data indicates that the majority of this population comprises Chinese students. How can universities reduce their dependence on a single country as the biggest driver of growth in international student numbers?

Ashwin Assomull and Sudeep Laad of L.E.K. Consulting highlight how India and other nascent markets offer promising potential and a means to safeguard enrolment rates for universities

Private equity

EducationInvestor Global • April/May 2020

Middle East & Africa A decree of unconfidence 38 International investors with eyes on Egypt’s booming international K12 sector are jittery after government introduced a new decree capping foreign ownership of schools at 20%. Have authorities poured too much cold water on a hot market, asks Josh O’Neill

finance Deals The month’s latest transactions

42

Results The month’s company announcements

54

executive moves Executive moves

62

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NEWS

Exclusives

Canadian pension fund and L’Oréal family office acquire Galileo in €2.2bn deal The Canada Pension Plan Investment Board (CPPIB), the investment arm of Canada’s largest pension fund, bought a stake in private university operator Galileo Global Education in a deal valued at more than ¤2.2 billion, EducationInvestor Global exclusively revealed.

This publication learnt that CPPIB had taken a 40% stake in Galileo, fending off competition from suitors that included private equity houses KKR, CVC Capital Partners and BC Partners, as well as a chorus of family offices and sovereign wealth funds.

Tethys Investments, a private equity fund controlled by France’s

Bettencourt family, which owns cosmetics giant L’Oréal, upped its existing stake in Galileo from 20% to 40%, one source told this publication.

A long-term fund overseen by Europe’s Montagu Private Equity took the remaining 20% stake, it is understood.

Goldman Sachs and Rothschild, the investment banks running the auction of Galileo on behalf of Providence, had initially targeted a price of around ¤2.5 billion – around 20-times EBITDA – for the business.

However, a source told this publication that the deal was ultimately valued at 16-times Galileo’s earnings for the past 12

months, which totalled around ¤140 million, indicating a price tag of between ¤2.2 billion and ¤2.3 billion.

With 42 universities worldwide that cater to more than 100,000 students, Galileo is Europe’s largest for-profit university operator.

Its portfolio of institutions includes the Paris School of Business, Macromedia University in Germany and Instituto Marangoni, an Italian fashion school.

Many of Galileo’s universities specialise in arts and creative disciplines.

Instituto Marangoni has branch campuses in China, India and the US. Last October, Galileo launched

a ¤700 million loan to refinance existing debt, bankroll acquisitions and pay shareholders a ¤70 million dividend – the third dividend paid to Providence in two years.

CPPIB co-owns global school network Nord Anglia, which it acquired in 2017 alongside Baring Private Equity Asia in a $4.3 billion take-private deal.

CPPIB could not be reached for comment.

Tethys could not be reached for comment.

Providence did not immediately respond to a request for comment.

Rothschild did not immediately respond to a request for comment.

French nursery provider to expand UK footprint French nursery operator Grandir is set to acquire Nurture Day Nurseries, a pair of London sites, in a deal that will expand its UK footprint, EducationInvestor Global exclusively revealed.

This publication learnt that Grandir, which owns France’s Les Petit Chaperons Rouge and UK-based operator Kiddi Caru, would close the acquisition of Nurture in the second quarter.

Nurture operates two settings in southwest London that generate annual revenues of £1.6 million and EBITDA of £390,000.

It was privately owned by its director, Manisha Patel.

The value of the transaction is unknown.

Following the deal, Grandir will own around 40 British nurseries.

The transaction is the latest link in a chain of buyouts of UK-based nursery businesses by French operators.

Last February, France’s private equity-backed La Maison Bleue, one of the country’s largest early years providers, acquired The Old Station Nursery group in the UK. Wielding La Maison Bleue’s checkbook, The Old Station Group has since acquired Premier Nurseries’ two sites in Oxford, and Sandhills Nurseries, a group of six settings near Birmingham and Lincolnshire.

Grandir entered the UK market in early 2017 through its acquisition of

Magic Nurseries, which at the time catered to more than 1,000 children through its 16 settings.

Later that year, Grandir bought Kiddi Caru, which at the time had 20 nurseries in central and southern England that provided more than 2,100 places.

According to CrunchBook, Grandir is bankrolled by private equity capital.

Grandir could not be reached for comment.

Private school hands mandate to UK broker Brookes Education Group, an international network of seven private schools, appointed advisors from Redwoods Dowling Kerr to explore options around a potential sale of one of its schools, EducationInvestor Global exclusively revealed.

This publication learnt that Brookes’ owners, which according to corporate filings are the firm’s five directors, handed the UK-based broker an exclusive mandate to scope out potential investors for

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its UK school, which is situated in Suffolk.

A source familiar with the process said that although the school is “seeking investment first”, the process could culminate in an outright sale .

Brookes also has six other sites in Canada, Russia, India, South Korea and the US. According to filings with Companies House, Brookes’ shareholders’ funds stood at minus £2.7 million in 2018, down from

minus £1.8 million a year prior.

This is because the organisation, at the time, had current assets of just over £88,000, but owed creditors more than £2.9 million within a year of 31 August, 2018.

But although the business is loss-making, one source familiar with the asset told this publication: “It could represent the chance to acquire a sizeable freehold with significant scope for financial growth and future development.”

The source added that the

schools group could be attractive to a strategic buyer that “knows what they’re doing and already has a flow of international students”.

According to its website, Brookes caters to more than 1,400 students.

The group boasts an average student-to-staff ratio of three to one, and of “100% university offers to graduates”.

A spokesperson for Redwoods Dowling Kerr declined to comment.

Brookes could not be reached for comment.

EducationInvestor Global • April/May 2020

NEWS

Exclusives

London-based buyout house acquires Learning Curve Agilitas Private Equity, a Londonbased buyout house, acquired UK apprenticeship provider Learning Curve for around £100 million, EducationInvestor Global exclusively revealed, wrapping up an auction process unveiled by this publication last year.

This publication learnt that MML Capital Partners – Learning Curve’s previous private equity owner, which took a 50% stake in the business in 2015 – exited the company following the close of a successful sale marshalled by Clearwater International.

It was understood that Agilitas, which has invested in several UKand Nordic-based businesses, would pay between nine- and 10-times Learning Curve’s EBITDA, which stood at £11 million in 2019, for a

controlling stake in the organisation.

It was unclear what size stake Learning Curve’s directors – Brenda McLeish and Jon Cummins – would retain.

The deal came just days after Learning Curve announced its acquisition of London-based hair and beauty training provider the London Hairdressing Apprenticeship Academy and its subsidiary, London Beauty Training Academy.

Agilitas’ acquisition of Learning Curve marked the private equity group’s first foray into the education sector.

Its portfolio includes Exemplar Health Care, Hydro International and Teracom Denmark, according to its website.

Founded in 2004, Learning Curve caters to more than 100,000

Brenda McLeish, Learning Curve

students a year through its range of apprenticeship programmes, academies and government-funded training schemes.

According to its website, Learning Curve services more than 4,500 employers a year, assisting them with the development of workplace-training schemes, vocational qualifications and

long-term apprenticeships.

Directly funded by the UK’s Skills Funding Agency and Education Funding Agency, Learning Curve is “the largest subcontractor partner to FE [further education] colleges of our type”, the firm’s website states.

According to its website, Agilitas “focuses on making transformational investments in defensible businesses”.

A representative for Learning Curve declined to comment on the details of the transaction.

Clearwater International could not be reached for comment at the time of publication.

Agilitas could not be reached for comment at the time of publication.

MML Capital Partners could not be reached for comment at the time of publication.

Canadian pension fund and buyout houses vie for ownership of Babilou The investment arm of Canadian pension fund OMERS and French infrastructure fund Antin were among a handful of suitors vying for ownership of Babilou, France’s largest daycare operator, EducationInvestor Global exclusively revealed.

Three sources familiar with the auction of Babilou, which could fetch several billion euros, told this publication that OMERS Private Equity, the investment division of Ontario’s government pension fund, and Antin Infrastructure Partners, a private equity firm that invests in infrastructure companies, were closing in on the nursery operator.

Two sources said that Partners Group is also still “in” the process – meaning Babilou’s shareholders may have been considering a bid from the $91 billion Swiss private equity behemoth.

One source said that Blackstone, the world’s largest buyout house, had also shown interest in acquiring

EducationInvestor Global • April/May 2020

Babilou – though this information could not be corroborated.

JP Morgan, the investment bank spearheading the sale of Babilou, had fielded interest from other investors including US-listed nursery operator Bright Horizons and GIC, a Singaporean sovereign wealth fund, sources said. However, both parties were no longer pursuing an acquisition, it was understood.

While the values of bids tabled

by OMERS, Antin and Partners Group are unclear, this publication reported in January that auctioneers were targeting a price equivalent to around 20-times Babilou’s forecasted earnings for this year of ¤100 million – or roughly ¤2 billion.

But a source told this publication in January that this figure was “extremely high”, and suggested that a double-digit price-to-earnings multiple between 14 and 18 was “more realistic”.

One source said that the “price was closer to ¤1.5 billion”.

In any event, a successful sale should net more than ¤1 billion for Babilou’s shareholders.

No final accord on a deal has been reached and talks over the acquisition may yet fall apart. It is unclear when – if at all – a sale of Babilou will be finalised.

Babilou’s 2020 revenues, which factor in its recent acquisitions, were forecasted to reach around ¤600 million. However, revenue and earnings forecasts do not account for any potential losses caused by the outbreak of covid-19, the new deadly coronavirus that has spread across the world and prompted mass nationwide self-isolation measures and cross-continental travel bans. At the time of publication, all nurseries, schools and universities in France were closed by order of government in a bid to stem the spread of the virus.

One source suggested that JP Morgan may “have to put the process on hold soon” should financials need

to be re-evaluated in light Covid-19related losses.

Babilou operates more than 500 nurseries that collectively cater to more than 20,000 children in countries including France, Germany, Belgium, Dubai, Switzerland, India and, most recently, China.

Babilou is majority-owned by its founders the Carle family, which established the business in Paris in 2003. Minority investors include international buyout house TA Associates; Cobepa, a Belgian private equity firm; the private equity unit of French bank Société Générale; and Raise, a French private equity fund.

A spokesperson for OMERS declined to comment.

A spokesperson for Partners Group declined to comment.

A spokesperson for JP Morgan declined to comment.

Antin had not responded to a request for comment at the time of publication.

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NEWS

Exclusives

Rhône Capital abandons sale of Global Knowledge The sale of Global Knowledge, a private equity-owned European provider of technology and corporate skills training, was abandoned after an auction process failed to drum up interest, EducationInvestor Global exclusively revealed.

This publication learnt that Cavendish Corporate Finance, the sell-side M&A advisory firm mandated to oversee the sale of Global Knowledge on behalf of its owner, Rhône Capital, pulled the business from the market after two rounds of bidding failed to solicit serious offers.

Sources said that Cavendish Corporate Finance approached a raft of suitors late last year and once again in January – but both times failed to secure a buyer for the business.

“There just wasn’t enough appetite,” one source said.

It was understood that the decision to ditch the sale of Global Knowledge was made prior to the outbreak of Covid-19, which has brought industries to their knees as governments worldwide continue to impose stringent self-isolation measures in an attempt to curb the spread of the deadly coronavirus.

It was unclear whether Rhône Capital and Cavendish Corporate Finance would look to relaunch the auction.

A prospectus, which put Global Knowledge’s EBITDA at around

¤13 million, was initially circulated to prospective bidders in the fourth quarter of last year.

The business was set to be broken up, with New York-based Rhône Capital retaining ownership of the US division, while the European arm was to be carved out and offloaded.

Catering to more than 200,000 IT and business professionals each year, Global Knowledge is one of Europe’s largest corporate training providers.

Global Knowledge delivers more than one million individual courses a year, 80% of which are hosted online, in areas such as coding, blockchain technology, application development and cyber-security.

It is acknowledged as a competitor of the UK’s QA, the ITtraining provider owned by CVC Capital Partners, Europe’s largest private equity firm, Global Knowledge has longstanding partnerships with technology giants Microsoft, Cisco and VMware.

Last November, Global Knowledge acquired Hollandheadquartered HODAC Training.

The firm encompasses Lerio, which specialises in Microsoft applications, and GK Noord, a longtime reseller of Global Knowledge courses in the northern Netherlands.

It is not uncommon for organisations to acquire third-

party sellers of their products in order to quickly gain market share in locations where they historically did not have the capacity to set up shop themselves.

In 2017, Global Knowledge acquired Ottawa-based ctc TrainCanada, and in doing so gained presence in 10 Canadian cities through a network of training centres.

Rhône Capital acquired Global Knowledge in 2014, when its former owner MidOcean Partners, another New York-based buyout fund, exited the holding.

Rhône Capital, which has offices in London and New York, has a diverse portfolio spanning investments and exits in industries including business services, chemicals, consumer products, food and transportation.

Previous investments include

confectionary manufacturer Nestlé, cosmetics company Elizabeth Arden and aviation firm VistaJet. Rhône Capital is part-owned Eurazeo, a ¤17 billion Franceheadquartered private equity group.

Eurazeo acquired a 30% stake in Rhône Capital in 2018 for $270 million, funded by $100 million in cash and two million Eurazeo shares.

Under the agreement, Eurazeo has three representatives on Rhône Capital’s board and Rhône Capital has representation through a “nonvoting observer” on Eurazeo’s supervisory board, according to a press release.

Cavendish Corporate Finance did not respond to a request for comment.

Rhône Capital had not responded to a request for comment at the time of publication.

Forfar Education acquires two UK private schools Forfar Education, a privately owned school operator based in the UK, acquired two schools – The Gleddings Preparatory School in Halifax and Cameron House School in Chelsea – EducationInvestor Global exclusively revealed.

This publication learnt that Forfar Education, which is bankrolled by private City investors and headed up by chief executive John Forsyth, acquired Gleddings prep

8

in December and Cameron House more recently.

When contacted by this publication, Forsyth said he was “delighted to have acquired two schools that gel so well with the ethos of Forfar”, but declined to give further details relating to the transactions. The values of the deals are unknown.

Forfar Education also owns Brackenfield School in Harrogate.

The group’s purchase of Cameron House marks its first in London. Forfar Education also operates – but does not own – several schools in Asia.

Cameron House, described on its website as “a homely and heartlifting sight amid the bustle of Chelsea”, records annual revenues of around £560,000. Accountancy firm BDO brought the school to market on behalf of its former owners last August.

One source said that Cameron House’s student numbers had been in decline – a claim on which Forsyth declined to comment.

As of 31 August, 2019, The Gleddings School – which is coeducational and has “around 200 pupils”, according to its website – had net assets totalling £706,664 – up from £664,504 in 2018 – according to corporate filings.

EducationInvestor Global • April/May 2020

NEWS

Exclusives

Corndel to hit market in Q4 The owners of Corndel, a fast-growing apprenticeship provider that serves some of the UK’s largest companies, drafted in advisors from Lincoln International to explore options around a sale, EducationInvestor Global exclusively revealed.

This publication learnt that the directors of Corndel, which since inception in 2016 has won contracts from blue chip organisations including BP, Legal & General and UBS, instructed corporate financiers from the investment bank to launch an auction in the fourth quarter of this year.

In the meantime, Corndel will look to boost profitability by up to 40%, one source said, while Lincoln International will prepare the business for sale and meet with prospective buyers to warm up investors’ appetites.

According to corporate filings, during the six months ending 30 June, 2019, Corndel recorded pretax profits of £259,000.

However, Corndel’s annual revenues are expected to total £24

million this year, and its profit margin is expected to widen as it transitions from a start-up enterprise to a business that caters to more than 3,500 learners a year.

Corndel was launched in response to the introduction of the UK apprenticeship levy, which since 2017 has forced large organisations to set aside a percentage of their payroll value to fund workplace training through apprenticeship schemes.

Corndel primarily offers highlevel apprenticeships and diplomas that are typically utilised by large organisations to upskill members of their management teams. It counts several FTSE 100 organisations among its key clients.

This publication understands that Corndel’s management team, which is led by chief executive Sean Williams, is seeking a funder that can help the business reach £100 million in revenues over the next four years by bolstering its apprenticeships, commercial training and executive coaching offerings in the UK and internationally.

The first phase of Corndel’s growth, between 2016 and now, was funded by around 35 individual investors who provided the firm with capital through the UK’s enterprise investment scheme, a tax-efficient investment initiative that channels funds from private investors into fledgling firms.

Corndel is likely to draw interest from mid-market private equity houses, which are attracted to the UK apprenticeship market because of the relatively high levels of fragmentation it showcases and the role its participants play in improving productivity levels – an initiative that has strong cross-party support in Whitehall.

Corndel could also catch the eyes of corporate buyers, one source said.

One such suitor could be US-based publisher Wiley, which stepped into the UK training market in January with its $129 million purchase of technology training provider mthree from ECI Partners.

One source, however, questioned Corndel’s “exposure” to changes to

the apprenticeship levy – specifically around the ways in which levy funds can be deployed – because of its acute focus on providing management training, as opposed to low-level apprenticeships for school leavers. Lobbying efforts to prevent levy funds being used to fund socalled MBA-style apprenticeships have crystallised (see page 17).

If such warnings are acted on and rules are revised, there is a risk that Corndel’s revenues could take a hit as levy-paying companies could be forced to reallocate funds to lowerlevel training initiatives, the source said.

A spokesperson for Corndel said: “We are seeking a funding partner that shares Corndel’s vision and values so that we can deliver yet more transformative professional learning to more learners and more businesses.

“We have appointed Lincoln to help us in that search.”

A spokesperson for Lincoln International confirmed its mandate, but declined to comment further.

KKR among host of private equity groups placing preliminary bids for Lifetime Training A chorus of private equity houses including KKR and CapVest tabled preliminary bids for Lifetime Training, the UKbased apprenticeship provider owned by Silverfleet Capital, EducationInvestor Global exclusively revealed.

This publication learnt that Houlihan Lokey, the investment bank overseeing the auction of Lifetime Training on behalf of its private equity parent, collected first-round bids for the business, with price expectations currently sitting at around £200 million.

London-headquartered buyout groups Bowmark Capital and Charterhouse Capital Partners were also understood to have placed bids.

EducationInvestor Global • April/May 2020

According to one source, Lifetime Training was being marketed as having EBITDA of around £20 million – suggesting a price-to-earnings multiple of around 10 was being targeted by auctioneers.

KKR, one of the world’s largest private equity groups, is understood to have filed a bid through its $1.3 billion Global Impact Fund.

According to a press release, the fund is “dedicated to investment opportunities in companies whose core business models provide commercial solutions to an environmental or social challenge”.

Silverfleet Capital acquired Lifetime Training from rival mid-market private equity group

Sovereign Capital in 2016 for between £115 million and £120 million. At the time, Lifetime Training recorded EBITDA of around £11 million.

Silverfleet Capital drafted in bankers from Houlihan Lokey last July to explore options around a sale of the business, as reported exclusively by this publication.

News of the first bidding round came hot on the heels of Agilitas Private Equity’s £100 million purchase of Learning Curve, another UK-based apprenticeship provider, reported exclusively by this publication.

Founded in 1995, Lifetime Training skills some 20,000 people a year through its level two and

three apprenticeship schemes. It was named apprenticeship training provider of the year in 2019 by RateMyApprenticeship.

According to its website, Lifetime Training counts among its corporate clients organisations such as Pret A Manger, McDonald’s and Pure Gym. Houlihan Lokey declined to comment on its own position and on behalf of its client, Silverfleet Capital.

Spokespeople for KKR and CapVest all declined to comment.

Bowmark Capital and Charterhouse Capital Partners had not responded to requests for comment at the time of publication.

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NEWS

Covid-19

Twitter users accuse GEMS Education of creating fake accounts to promote positive image Twitter users have accused GEMS Education of creating and using fake user accounts to promote a false positive image, calling on Dubai’s education watchdog to curtail what they suggest is a propagandistic press campaign.

In a tweet published on 17 April, a user named Moe Aamer shared screenshots of what he said was a “small sample of recently created fake accounts to tweet positively” about the United Arab Emirates’ largest for-profit school operator.

The accusation followed a weeks-long spat between parents of children enrolled at schools owned by GEMS and the group over its unwillingness to offer outright discounts on tuition fees at a time when a turbulent economy ushered in by the coronavirus pandemic has led to widespread job and income losses.

Aamer’s tweet went on to say: “@KHDA we need your support to #HelpGEMSParents.” KHDA refers to Dubai’s Knowledge and Human Development Authority, the emirate’s education regulator, which recommended that schools offer discounts where possible but stopped short of ordering them reduce fees.

In another tweet, Aamer shared a screenshot of a condition pertaining to GEMS’ new relief fund, which was rolled out to provide financially stricken families with discounts after more than 15,000 parents signed a petition calling for fee cuts. He said: “Wow @GEMS_ME. The discount is for three days. Failure to pay it, discount will be withdrawn. It’s like take it or leave it. @KHDA please do something! I hate how this practice pressure (sic) and how irresponsible they are in their communication #HelpGemsParents.”

A screenshot accompanying the tweet shows an excerpt of what is thought to be a letter from GEMS to parents regarding the fund. It reads: “To avail your relief package, you must pay the balance of the discounted tuition fees within three working days from today. Failure to comply will result in the relief discount being withdrawn.”

According to GEMS, more than 20,000 students’ fees will be covered by the relief package, which in some cases will provide discounts of 50% or more – but only if parents can provide documents evidencing that their finances have been negatively impacted by Covid-19.

An account using the handle @DubaiNameShame, which is accompanied by a blue tick, tweeted on 17 April: “Amazing how the new PR directive from @GEMS_ME has suddenly ignited Twitter accounts

set up in April 2020, account have rarely tweet (sic) and accounts from Gems teachers and staff!”

Another user replied to the tweet, saying: “Gosh Twitter is overrun in the last few seconds with a load of positive GEMS tweets. The bots have woken or instructed?”

The new accusations risk further intensifying relations between GEMS and its students’ parents, many of whom were incensed after they received a “threatening” email from the organisation in which it said students would be pulled from online classes if tuition fees were not paid. GEMS said in the email: “This is a final reminder to settle your child’s school fees. If payment has not been received by 12 PM on Tuesday, 21st April 2020, then we have no choice but to remove your child from access to our remote learning programme from Wednesday, April 22.”

Eton College Elite UK private schools reject fee cuts offers free online education The headmaster of prestigious English private boys’ school Eton College, Simon Henderson, has written to the head of every state school in the UK offering their pupils free use the school’s online self-study course etonx.com in response to the Covid-19 pandemic.

The schools can email etonxoffer@etoncollege.org.uk and Eton will supply them with all the relevant information.

Eton sent all its pupils home in March and is offering its boarding accommodation to key workers in an effort to protect them from the illness.

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Some of the UK’s most eminent private schools have refused to reduce tuition fees while also applying for public funds that would be used to pay staff salaries.

Elite institutions including Westminster, Dulwich and St Paul’s in London have resisted demands from parents to lower fees for the coming term at a time when all schools are closed and teaching is being carried out online due to measures enforced in response to the Covid-19 pandemic.

Parents with children enrolled at these private schools and others are incensed because some schools that have refused to reduce tuition fees have also applied for taxpayerfunded grants to cover the salaries of furloughed staff.

They argue that the annual fees they pay – which can be as high as £40,000 – cover schools’ operating

costs, including staff salaries, under normal circumstances, and should thus be sufficient at a time when all learning takes place online and amenities and extra-curricular activities are off the cards.

According to the Financial Times, a group of 50 parents with children at Westminster, which has offered only boarders a fee reduction of 28%, have written to the school’s governors calling for a cut to fees for all students, funded by its reserves.

One parent likened Westminster to Liverpool Football Club, which despite being bankrolled by a multibillion-pound owner has applied for public funding. “They are applying for taxpayers’ money to fund salaries yet our school fees that are still being collected would normally be sufficient to cover these. This does not sit well with myself or other parents,” the parent said.

But Patrick Derham, headmaster of Westminster, which is classed as a chairty and reported income of £30.2 million in 2018, has said that his school will credit parents at the end of the summer term once any cost savings have been calculated.

Dulwich will look to do the same, according to headmaster Joe Spence, who said that his school is exploring additional support for families that have been financially impacted by the coronavirus pandemic.

The chairman of governors of St Paul’s, which is continuing to charge full fees while waiving boarding charges, said in a letter to parents: “I do commit to handing the savings back to parents when the position is clear. We expect to achieve at least a 10% rebate on fees and will inform you before the end of the summer term.”

EducationInvestor Global • April/May 2020

NEWS

Covid-19

Fee for all: Nord Anglia sparks parental backlash by failing to offer discounts across the board Schools belonging to large international groups in jurisdictions including Hong Kong are being bombarded with requests from parents to cut tuition fees after sister schools offered reductions and rebates.

More than 240 parents with children enrolled at Nord Anglia International School Hong Kong have demanded a 30% reduction to tuition fees, warning that they would withdraw children from classes if the school did not respond by 15 April, according to the South China Morning Post.

Hong Kong-based parents made their case for fee discounts just days after Nord Anglia’s Dubai school offered its parent base a 15% discount in fees for the third term, throughout which lessons will be hosted online due to school closures enforced in response to the Covid-19 pandemic. A petition filed by Nord Anglia parents in Dubai gained more than 700 signatures.

Parents at Nord Anglia International School Hong Kong, which according to financial reports lost HK$49.5 million (£5 million) in 2017-18, suggested that the school take a cue from its Dubai counterpart and reduce fees to ease the financial burden on parents whose incomes have been negatively impacted by the coronavirus pandemic.

One parent reportedly told the South China Morning Post that it was “inappropriate” that Nord Anglia’s Hong Kong branch would not offer discounts, even though the firm’s Dubai offshoot had done so.

The common demands of disgruntled parents across the world with children enrolled in schools owned by large international organisations underscore the moral challenge of reducing fees only at select schools, but not all, during a time of crisis. Other global operators of private schools, including GEMS Education, Inspired and Cognita, could face similar demands in the

coming weeks from fee-paying parent bodies across dozens of countries.

Nord Anglia International School Hong Kong’s principal, Brian Cooklin, told parents on 14 April that the school had already frozen fees for the 2020-21 academic year and, therefore, could at present offer no further reductions.

“It is not possible to provide a discount on tuition fees without damaging the service being provided,” Cooklin wrote in an email to parents. “This could only be achieved through redundancies of teachers, as staffing is the major expenditure.

“We have introduced pay cuts, a recruitment-and-pay freeze, and reduced other costs for the next session.

“We’ve also frozen fees for the next year. We have received many messages of thanks from parents for taking this step and for how our teachers have navigated this crisis to ensure our students continue to

receive high-quality education.”

Cooklin’s response was sent to 248 families representing more than 315 students at Nord Anglia International School Hong Kong, who since February have been taking online classes because authorities in the territory ordered all schools to close until mid-April.

Parents, many of whom have taken pay cuts amid a turbulent economic climate, say that online lessons are inadequate and do not reflect the school’s fees, which range from HK$75,000 to HK$182,000.

They are also seeking further cuts to fees for the September term, should schools remain partially or fully closed.

Nord Anglia has 61 international schools, boarding schools and private schools scattered across nearly 30 countries. The company, which in 2017 was valued at $4.3 billion, is owned by Baring Private Equity Asia and a Canadian pension fund.

English schoolchildren to UK government to cap be given predicted grades university admissions after exams cancelled Teenagers due to take GCSE and A-level exams in England this summer are to be given predicted grades by their teachers after exams were cancelled because of the coronavirus crisis.

The UK government stated that exam boards will have a role in checking the suggested grades, and students will have a right of appeal.

They will also be given the chance to sit an exam when their school reopens, if they disagree with their allotted grade.

The announcement is likely to be bad news for the substantial body of individuals and companies that provide tutoring support to schoolchildren prior to their examinations.

EducationInvestor Global • April/May 2020

The UK government is planning limits on the number of students that universities in England can recruit in the wake of the Covid-19 pandemic, The Guardian reported.

A cap is being placed on the number of UK and EU undergraduates admitted for the academic year starting in September.

UK universities are facing a huge gap in tuition fees as international students from China and other countries cancel or postpone enrolments due to the Covid-19 crisis. The move is being introduced to stop certain universities scooping up domestic students to fill their courses, leaving other, less prestigious institutions, without students.

The move is reported to be supported by higher education leaders and will be the first such limit since the university admission cap was lifted in 2015.

Alistair Jarvis, chief executive of Universities UK (UUK), the group including most of the mainstream English universities, said: “The UUK board discussed a range of measures needed to promote financial stability of the sector in these tough times. Foremost was the need for government financial support for universities. Student number controls were discussed and it was agreed that further consideration of the pros and cons were needed, with further input from members.”

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NEWS

Covid-19

UK Treasury reluctant to grant universities £2bn bailout The UK Treasury is pushing back against calls from the country’s universities for a £2 billion bailout, according to the Financial Times, stoking fears of bankruptcies in a sector that has been hammered by Covid-19.

The Treasury’s opposition to a sector-specific bailout package, which according to the FT has been confirmed by “officials from three Whitehall departments”, comes as universities continue to warn of potentially irreparable holes in their balance sheets come September, should international student enrolments take a substantial hit.

Revenue from international students contribute nearly £7 billion a year to the UK higher education sector.

Whitehall is reportedly divided over how to approach a stimulus package, which universities argue is essential to protect research

departments that will play an integral role in solving problems linked to the Covid-19 pandemic.

Universities UK (UUK), the higher education sector’s lobby group, has tabled a proposal in which it promises to cut costs, accept restructuring and curb predatory admissions policies that risk leaving less prestigious institutions worse off financially.

Rishi Sunak, the UK chancellor, is expected to review UUK’s proposal in the coming days, according to the FT. But the newspaper’s Whitehall sources – who have stressed that no final decision has been made – have said that the early signs suggest the Treasury is not receptive to what is considered “special pleading” from universities.

The Treasury believes that institutions should instead take advantage of furlough schemes and crisis loans before seeking any

further bailout, according to the FT, which reported that the departments of education, health, and work and pensions signalled support for a bailout last week during a crossdepartmental meeting.

Alistair Jarvis, chief executive of UUK, said there was “urgent need” for clarity on financial support. He warned of significant cost-cutting in the sector if the government does not intervene in the coming weeks.

“Without government intervention there is a real risk that

some universities will go bankrupt, which will have significant adverse impact on those local communities which can least afford it,” he said.

Earlier this month, the government announced that it would place caps on the number of domestic and European undergraduate students that universities can admit in the next academic year, in a bid to prevent certain institutions scooping up students and leaving others with empty courses.

Wall Street English to wind down China operations as coronavirus crisis bites Wall Street English, a global provider of English-language tuition, will wind down its China operations, this publication can confirm, highlighting fatal operating conditions ushered in by the Covid-19 pandemic.

The organisation, which is backed

by Baring Private Equity Asia, “has been losing a lot of money over the past 18 months and the Covid crisis tipped it over the edge,” a source at a rival organisation told this publication. The source said that they “can confirm” Wall Street English’s China arm will close as early as next week.

The Covid-19 pandemic, which closed thousands of schools worldwide and forced more than one billion students’ education online, has exposed the fragility of centre-based delivery models, many of which have struggled to pivot quickly to digital provision.

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“The [Chinese] staff were told around 10 days ago to stop all sales and that the business would close month end,” the source said.

“It’s a massive business but badly structured for the change [to online provision] in the Chinese market and the rising cost of personnel,” the source added.

According to reports, Wall Street English has more than 70 centres across China, most of which are located in top-tier cities. It is one of the organisation’s largest markets.

David Kedwards, chief executive of Wall Street English, told this publication in an email that “we don’t comment on press speculation, particularly as the Covid-19 outbreak has created unprecedented stress across the global economy and resulted in a large degree of unfounded rumours.

“We are, however, making various adjustments to the business model

to ensure we can meet the needs of our students and employees, which can often spin into more dramatic rumours.”

Hong Kong-headquartered Wall Street English derives the majority of its revenues from delivering face-to-face tuition at more than 450 brick-and-mortar franchise sites situated in China and other countries across Asia, Europe, Latin America and the Middle East.

The closure of its China operations lays bare the brutal trading conditions resulting from contracting economies, site closures and exam cancellations that centrebased tuition providers – and other education businesses – worldwide are contending with.

This week, a private preparatory school in the UK announced that it would close this summer as the pandemic “unravelled” its continuity plans.

Founded in 1972, Wall Street English has an alumnus of more than three million students and the company enrolled 180,000 in 2019. The organisation, which has a presence in 28 countries, was acquired by Baring Private Equity Asia – co-owner of international schooling giant Cognita – and CITIC in 2018 for $300 million from its former owner Pearson, the publisher.

According to reports published earlier this year, Wall Street English “forced” its employees in China to work throughout February on the expectation of full pay, but “a couple of days before pay day, Wall Street English cut pay by 50% and fired approximately 50% of their staff”.

Baring Private Equity Asia had not responded to a request for comment at the time of publication.

EducationInvestor Global • April/May 2020

NEWS

Covid-19

Over a third of international university students reconsider study abroad plans More than a third of prospective international university students are considering changing their study abroad plans, according to a survey, suggesting the pandemic could cause long-lasting financial scars on institutions worldwide.

Figures published on 14 April by Studyportals, a comparison website for overseas university programmes, showed that 40% of respondents to a survey were revising their plans to study in another country in light of global Covid-19 outbreaks. This figure had risen from 31% a few weeks prior.

The growing number of students out of the 850 respondents willing to alter their study abroad plans because of Covid-19 signals financial headwinds at universities in the UK, US, Canada and Australia, many of which depend heavily on incomes from foreign students, who tend to pay inflated tuition fees.

Students surveyed were mostly from key source markets, including Nigeria, India, Pakistan, Kenya, Ghana and Bangladesh.

Of the 307 students who told Studyportals that they were reevaluating their options, 152 wished to postpone enrolment until next year or the year after, while 128 were considering enrolling on an online course. Some 66

EducationInvestor Global • April/May 2020

respondents said they would not go abroad and would instead enrol at a university in their home country, while 36 were considering a different destination country and 33 would not pursue university studies at all.

At present, international travel remains prohibited in most parts of the world.

The survey’s findings were published a week after Moody’s, the global ratings agency, issued a research announcement saying that “the virus outbreak will negatively affect finances at rated universities in the US, Canada, UK, Australia, Singapore and Mexico this year”, as “lower-than-expected enrolments will reduce tuition fee income and put pressure on institutions’ budgets”.

Moody’s had already downgraded the credit rating of the UK’s higher education sector in November last year, suggesting that the country’s universities would face a rise in borrowing costs.

In March, industry body Universities UK warned that institutions could face a £7 billion “black hole” come September, as the sector prepared to ask for a government bailout to cover widespread income losses from international students, particularly those from China. At the University of Manchester, for instance, one in eight students is Chinese.

UCL study casts significant doubt on efficacy of global school closures

University College London

The economic costs of closing schools could outweigh the “very weak” evidence supporting a policy that has been used by dozens of governments to combat the spread of Covid-19.

Governments across the world have in recent weeks moved to close schools and other education centres as part of national efforts to contain the spread of the coronavirus and keep pressure on health services at a minimum at a time when infections and deaths continue to rise.

But research carried out by University College London (UCL) has cast serious doubt on the efficacy of the widely used tactic.

“The evidence to support national closure of schools to combat Covid-19 is very weak,” said the research led by Russell Viner, a professor at Great Ormond Street Institute of Child Health, part of UCL. “The economic costs and potential harms of school closure are undoubtedly very high.”

According to The Times, ministers in the UK government cited the report in private conversations

around whether it should have looked to re-open schools after the Easter break, which ended on 17 April.

UCL’s research is an analysis of nine published academic studies and seven non-peer-reviewed publications that all examine the effects of school closures during pandemics, including this one and the 2003 SARS outbreak.

The research stresses that the majority of children who contract Covid-19 show no – or mild – symptoms and thus warns: “Policymakers need to be aware of the equivocal evidence when considering school closures.”

The study could be leveraged by government officials around the world to put pressure on education secretaries and leaders to consider re-opening schools as the pandemic continues.

Denmark announced plans to gradually re-open kindergartens and primary schools as part of wider plans to loosen restrictions on social distancing after the country saw a drop in the number of infections.

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NEWS

Early years

Revealed: UK lender refuses to bankroll UK: Poppy nursery acquisition until target performs & Jack’s ‘in line with pre-Covid-19 levels’ acquires Nottingham setting A prominent UK lender has refused to bankroll an acquisition in the country’s early years sector until the target business can prove its financial performance is “in line with pre-Covid-19 levels” – signalling a potential credit crunch in coming months.

This publication has learnt that Lloyds Banking Group has refused to lend money to a prospective buyer of a UK nursery group because the bank does not yet know the severity of the financial impact that Covid-19 will have on childcare providers.

The bank has said it would not lend money to a suitor for a UK nursery group until it sees an evaluation of the target’s performance during the three months after lockdown measures are lifted. UK nurseries, along with schools, were ordered by government to close indefinitely on 20 March as part of wider measures intended to contain the spread of

the new coronavirus.

In a letter seen by this publication, a banker from Lloyds told a prospective buyer of a UK nursery group “that CBIL [Coronavirus Business Interruption Scheme] has replaced EFG [Enterprise Finance Guarantee] at the current time and as this request is to refinance the existing debt and also support purchase of a new nursery business… it does not fall within the parameters of a Covid-19 support facility.

“In the circumstances as CBIL support is not appropriate, we are unable to proceed formally at this time.”

The banker goes on to say that “although we are unable to finalise formal support/funding at this time, our view to support the business with its application in the future remains positive, so agreement, in principle, is given subject to” a number of conditions, including “minimum three months’

MI [management information] to confirm existing and target business is performing in line with preCovid-19 levels”.

Valuations of nursery targets “will not, of course, be instructed until the above have been confirmed to the satisfaction of credit with management information to be provided and commented on by the valuer”, the banker wrote.

Other conditions outlined in the letter stipulate that “there are no further cashflow/working capital requirements in respect of Covid-19”.

The bank’s response signals an unwillingness to lend until several months after social distancing measures are relaxed – indicating that credit may be difficult to obtain, even once nurseries and other business are legally permitted to re-open.

Lloyds had not responded to a request for comment at the time of publication.

UK: Secondtime buyers acquire Derbyshire nursery

UK: Storal Learning acquires 20th setting

UK: Old Station Nurseries acquires Essex setting

Little Leprechauns Day Nursery in Chesterfield, Derbyshire has been purchased by Anant and Tushi Popat, who having established themselves in the childcare sector, were looking for a second nursery setting to buy.

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Expanding nursery group Storal Learning has established its 20th early years setting with the acquisition of Edgbaston Nursery School in Birmingham.

The nursery has a capacity for 94 children and provides care for children aged from newborn to five years of age. It had a ‘good’ rating after its most recent Ofsted inspection.

The sale was facilitated by commercial real estate firm Redwoods Dowling Kerr.

Poppy & Jack’s Group, an expanding nursery operator based in the Northwest of England has purchased West Bridgford Day Nursery, located in an affluent suburb of Nottingham, which provides childcare for up to 40 children. It is the group’s tenth nursery.

West Bridgford Day Nursery was sold on a freehold basis, having been marketed at £850,000.

UK: Kids Allowed acquisition takes Kids Planet to third place Kids Planet became the third-biggest nursery group in the UK when it acquired eight Kids Allowed settings earlier this year.

Kids Planet now has 52 nurseries across the Northwest and the Midlands, providing nearly 6,000 childcare places, with only Busy Bees and Bright Horizons providing more.

The acquisition was funded by Barclays and Clydesdale Yorkshire Bank with further investment from BGF.

Growing nurseries group The Old Station Nurseries has acquired Small Friends Day Nursery, located in Leigh-on-sea, Essex.

EducationInvestor Global • April/May 2020

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K12

GEMS Education founder mulls stake sale The founder of Dubai-based GEMS Education, one of the world’s largest independent school operators, has reportedly held talks to offload some of his majority stake in the firm to raise as much as $200 million.

Sunny Varkey, who launched GEMS in 1959, is in discussions with bankers from Rothschild about finding new investors for the private equity-owned group as the Covid-19 pandemic continues to batter the education sector, according to Bloomberg, which cited people with knowledge of the matter.

But the investment bank has struggled to drum up interest amid concerns about the widespread economic impact of the pandemic, which has weighed on private schools’ revenues as fee-paying parents continue to lose jobs and income, forcing them to re-evaluate their outgoings. According to Bloomberg, whose report did not specify how large a stake might be sold, representatives for GEMS and Rothschild declined to comment.

School operators in the United Arab Emirates and elsewhere anticipate widespread losses in September as a result of

reduced student numbers and reimbursements handed to parents who feel they have been shortchanged by the online education that has replaced their children’s school life. UNESCO estimates that more than one billion learners have been impacted by closures of education centres enforced by governments worldwide in response to the coronavirus outbreak.

News of Varkey’s exploration of a stake sale comes just days after a petition signed by more than 13,000 parents with children enrolled in GEMS schools piled pressure on the group to cut fees by

at least 30% after it was announced that learning would take place online for the remainder of the academic year. GEMS Education, which is part-owned by CVC Capital Partners, has agreed to offer discounts and deferments to families that can prove financial hardship has been induced by the coronavirus.

CVC, Europe’s largest buyout group, last year bought a 30% stake in GEMS from its former minority shareholders including Blackstone Group, Fajr Capital and Bahrain’s sovereign wealth fund. News of the transaction was revealed by

this publication. GEMS Education, which is majority-owned by the Varkey Group, was valued in the region of $5 billion last May, at the time of the deal, which was equivalent to 15-times its earnings.

Last summer, GEMS Educuation executives met with banks in London and New York to discuss a refinancing of debt worth some $1.65 billion. In July, the firm raised $900 million through a bond offering.

GEMS Education has a presence in the UK through Bellevue Education, a group of 19 schools, which it acquired in 2018.

Hong Kong: International schools flout restrictions on domestic student enrolments Dozens of international schools in Hong Kong are reportedly not complying with a government requirement that at least 70% of their students be non-natives.

The rule, which is designed to ensure enough seats in schools for children of ex-patriate families in the territory, is being flouted by 24 of 52 international schools,

according to the South China Morning Post, which analysed official statistics.

The proportion, which was raised from 50% in 2009, is not

being met by 24 institutions, at which more than 30% of students enrolled are locals, compared with 18% and 21% in the two years prior.

UK: Roedean Moira House School to close Private girls’ school Roedean Moira House School in Eastbourne, East Sussex is to close at the end of the academic year this summer.

Roedean Moira House joined the Roedean Group of Schools in

EducationInvestor Global • April/May 2020

2017. It announced on its website that it has exhausted all available avenues to try to find an alternative to closing, but current revenue levels mean it faces unsustainable financial losses.

It received several bids from investors which the school says it pursued as far as possible, but these have not led to a solution it was able to accept.

The school added that its

partnership with Roedean has enabled it to secure the funding to meet all running and closure costs to allow it to operate until the end of the summer term, creating an ordered, solvent wind down.

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NEWS

Higher education

UK: Cash-strapped private university spared from bankruptcy by Chinese investor A Chinese investment group has acquired an ailing UK private university in a deal that marks yet another example of a mainland buyer sparing a British education business from bankruptcy.

China Education Group has signed an agreement with Richmond, The American International University in London that will “secure the longterm future of the university”. The terms of the deal were not disclosed.

Richmond, The American International University, the only UK university that awards both UK- and US-accredited degrees, had faced financial difficulties after its wealthy founder and benefactor, Sir Cyril Taylor, died in 2018 and froze out the university from his £200 million fortune, the majority of which was left to a charity. Taylor’s will left the university only a “virtually worthless” strip of land in New Jersey, according to The Times.

Richmond, The American International University had enacted its “teach-out” plan, an arrangement

whereby an institution that is set to close ensures its students can complete their studies.

Its acquisition by China Education Group is the latest link in a chain of recent transactions that have seen China-based investment firms absorb cash-strapped education businesses in the UK. In February, Chinese investors acquired Wisbech Grammar School in Cambridge.

After crashing into administration five years ago, St Bees School, one of Britain’s oldest boarding schools, reopened in 2018 after being financially resuscitated by Shenzhen-headquartered Full Circle, which also owns a handful of UK language schools.

China Education Group owns a portfolio of universities, which includes nine institutions in China and King’s Own Institute in Australia.

This academic year, the firm enrolled around 180,000 students.

China Education Group’s acquisition of Richmond, The American International University

US: Cambridge College to acquire New England College of Business and Finance Boston-based Cambridge College has said it plans to acquire the New England College of Business and Finance (NECB), also based in Boston, which will integrate NECB’s programmes into Cambridge College’s operations beginning in the spring.

The transaction is subject to final regulatory and accreditation approvals by the Massachusetts Department of Higher Education and the New England Commission of Higher Education.

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Susan Ifill, chairwoman of the Cambridge College board, said: “From its earliest days, Cambridge College has strived to unlock valuable educational opportunities for as many people as possible, keeping quality high and tuition costs low. The Cambridge College community looks forward to leveraging the unlimited potential and opportunities that this acquisition will bring to our student communities.”

will widen access to exchange programmes and internships and make the latter’s degrees more accessible to students in other parts of the world, the firm said.

The deal will afford Richmond, The American International University a “greater reach in international marketing and recruitment”, China Education Group said – suggesting it will seek to bolster its coffers by enrolling higher numbers of international students, who typically pay higher fees to study abroad.

But the transaction has been announced amid the Covid-19 pandemic, which has prompted governments worldwide to introduce international travel bans that have

prevented students from dozens of countries, including China, from returning to their overseas studies.

The UK higher education sector has voiced concerns about a potential multibillion-pound black hole in universities’ balance sheets come September, should international students be unable to enrol.

Founded in 1972 by Taylor, an education pioneer and ex-advisor to former British prime ministers Margaret Thatcher and Tony Blair, Richmond, The American International University is one of the UK’s oldest private universities.

It will continue as a self-governing non-profit organisation, according to a statement.

Malaysia: HOPE Education agrees to buy INTI Education Group HOPE Education Group (Hong Kong) Company has agreed to buy Laureate’s INTI Education Group, a group of higher education institutions in Malaysia.

The transaction value is $140 million, which includes a $14 million payment to a minority equity shareholder. INTI Education Group will remain part of the Laureate International Universities network until the closing of the transaction, which is subject to customary closing conditions, including approval by relevant Malaysian authorities.

Founded in 1986, INTI Education

Group joined the Laureate International Universities network in 2008 and today caters for more than 16,000 students enrolled in undergraduate and postgraduate degree programmes in a variety of academic disciplines, including biotechnology and life sciences, business, communications, engineering, computing and information technology, law, and hospitality.

HOPE Education Group (Hong Kong) Company is an established operator of higher education institutions, including universities and vocational colleges.

EducationInvestor Global • April/May 2020

NEWS

Vocational and skills training

UK: Government to pull plug on MBA apprenticeships The UK government is poised to axe a controversial apprenticeship scheme that allowed companies to enrol senior executives on MBA courses using funds intended for on-the-job training.

Since the introduction of the apprenticeship levy in 2017, which forces large organisations to set aside money for workplace training, campaigners have argued that funds should be used to onboard school leavers and upskill standard employees – not to send executives to business school.

The move to scrap the MBA qualification, which was included as part of the level seven senior leader occupational standard, is expected to be confirmed in early June, when the government is due to publish a review of MBA apprenticeships.

Under levy rules, UK organisations with annual wages bills of more than £3 million must set aside an equivalent of 0.5% of their payroll each month.

Under the changes, companies will still be able to spend levy funds on high-level leadership training, but such schemes are expected to be less attractive as participants would no longer receive a master’s degree on completing programmes.

In the first full year following the introduction of the levy, the number of apprenticeship starts fell 26% compared to 2015/16, before the levy was introduced.

Meanwhile, the proportion of high-level apprenticeships,

equivalent to bachelor’s degrees and above, increased from 5.3% to 12.8% over the same period.

According to FE Week, a trade publication geared at the further education sector, there were 6,387 starts on MBA apprenticeship programmes up to the end of the first quarter of 2019/20. Because each of these courses can receive up to £18,000 from levy coffers, the publication claims that up to £115 million had been spent funding these qualifications.

UK: Learning Curve acquires hairdressing apprenticeship company Learning Curve Group has acquired London-based hair and beauty training provider the London Hairdressing Apprenticeship Academy (LHAA) and its subsidiary, London Beauty Training Academy (LBTA).

Learning Curve Group already has hair and beauty academies in northeast and northwest England under its own name. It will continue to operate both LHAA and LBTA as stand-alone brands within the group.

The deal, for an undisclosed sum, will see Learning Curve Group establish its first fixed premises across the capital, with LHAA’s six hair academies and two LBTA beauty academies. Learning Curve stated it has plans for further growth once the businesses are fully integrated. All 80 existing LHAA and LBTA staff will transfer across, giving LCG a headcount in excess of 500.

Brenda McLeish, chief executive at Learning Curve Group said: ‘We’re delighted to be adding LHAA and LBTA to our already broad training provision and establishing a base in London. LHAA and LBTA are hugely impressive businesses that are delivering vital skills to learners

EducationInvestor Global • April/May 2020

across London. The business shared our values and vision of keeping the learner at the centre of everything we do, and we are looking forward to further growing the brands and helping make this in-demand provision accessible to even more learners.”

Francine and Trevor Luker, founders and directors at London Hairdressing Apprenticeship Academy stated: “LHAA and LBTA have become established as sector leaders in the provision of hair and beauty training. We work with some amazing clients and we are beyond proud of the fantastic team we have here, and everything that they have achieved. The time was right for us to step back and gain further investment in the academies. This will enable them to grow and reach the amazing potential that we know they can. We needed LHAA and LBTA to be owned by an organisation that cared as much as we all do here, and with Learning Curve Group, we have found that perfect match.”

Learning Curve Group was supported in the deal by Burness Paull and EY, while LHAA was supported by Macintyre Hudson, SBP Law Solicitors and HW Fisher.

17

NEWS

Ed tech and educational services

China: Rising star GSX Techedu slides after damning short-seller report labels it ‘blatant fraud’ GSX Techedu, one of the fastestgrowing Chinese online education providers, has seen its share price slide after a damning report by short-seller Citron Research labelled the firm “the most blatant Chinese stock fraud since 2011”.

After climbing more than 90% between 1 January and 25 February, from $23.74 to $45.42, New Yorklisted GSX Techedu was trading at $29.67 on 16 April – two days after the report was published. Earlier this year, GSX Techedu became the first listed ed tech company to reach a market capitalisation of $10 billion.

“GSX Techedu Inc. is overstating revenue by up to 70% and should immediately halt trading and launch an internal investigation,” Citron said in the report. “They are not even in a ‘fake it till you make it’ situation. Their forward growth trajectory is as foolish and fraudulent as their previous financials.”

US law firm Wolf Haldenstein Adler Freeman & Herz announced on 15 April that it is investigating “serious and disturbing class action

claims” about GSX Techedu on behalf of shareholders.

The allegations came shortly after GSX Techedu competitor TAL Education – one of the world’s largest education companies, also based in China but listed in New York – admitted to sales fraud.

Citron Research is the second short-seller this year to allege that GSX Techedu is a fraudulent organisation. In February, USbased Grizzly Research published a scathing report in which it accused GSX Techedu of fabricating student numbers, overstating profitability, offloading costs and committing capital expenditure fraud – concluding that “GSX’s success is actually based on a fraudulent scheme”.

Shortly after Grizzly’s report was published on 25 February, Sandy Qin, head of investor relations at GSX Techedu, rubbished the claims during a 30-minute phone call when contacted by this publication.

But there are parallels between allegations set out in both firms’ reports.

For instance, both Grizzly and Citron alleged that there was a major discrepancy between figures filed by GSX Techedu in credit reports in China and filings with the US Securities and Exchange Commission, Wall Street’s watchdog.

According to Citron, there was a “75% discrepancy in net profits”, which stood at nearly 80% in the final quarter of last year, according to GSX Techedu. This profit margin is considerably higher than that of competitors, including TAL Education, Yuanfudao and DAO. In response to this particular allegation, GSX Techedu told Citron: “The gap between the company’s credit report and S-1 filing was actually GAAP difference between China and U.S. after the group’s restructured to spin-off 2B business in 2017. The difference is totally reasonable and legitimate and has nothing to do with operational numbers.”

However, after scouring filings related to a spin-off or divestiture alongside accounting experts, “the

conclusion is that management is lying,” said Citron.

Both Grizzly and Citron also alleged that GSX Techedu has fabricated its student numbers, which is did, according to Citron, by “planting fake student users in WeChat groups”. This ploy, which was used to inflate revenues, is evidenced by identical student comments, explained Citron, which included in its report numerous screenshots capturing instances of duplicated feedback.

Citron stressed that investors should not take comfort in the fact that GSX Techedu is audited by a Big Four organisation.

“It is interesting to note that GSX’s auditor is Deloitte,” said Citron. “This is the same auditor that was used in the Longtop and China Media Express frauds – both exposed by Citron.

“We are not saying that all of their clients commit fraud, but don’t for a minute think because GSX has a Big Four auditor they are clean and that history won’t repeat.”

UK: Blackstone to buy student housing group Global investment business Blackstone has agreed to buy the UK student housing company IQ for £4.7 billion, City AM has reported, in what has been described as the largest-ever private real estate

transaction in the UK. IQ Student Accommodations owns and operates 67 sites in 27 UK towns and cities and is one of the leading providers of private purpose-built student

accommodation, with 84% of its portfolio value in Russell Group cities and 52% in London.

Blackstone is buying the business from Goldman Sachs, which owns 70% of the group, and medical

charity the Wellcome Trust which owns 28%. The Wellcome Trust was one of IQ’s founding investors and the student accommodation group merged with Goldman Sachs’ student housing business in 2016.

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EducationInvestor Global • April/May 2020

NEWS

NEWS IN BRIEF

n Nurseries

and primary and secondary schools in France will begin to re-open on 11 May as part of President Emmanuel Macron’s plans to jump-start the country’s economy following weeks of nationwide lockdowns.

Having set out plans to gradually lift restrictions enforced in response to the Covid-19 pandemic, France, which went into lockdown on March 17, will join European neighbour Denmark in permitting day care centres and schools to once again open their doors. From 15 April, Danish children aged 11 and under will be able to return to schools and nurseries, after a month of closures.

While children in France will gradually be allowed to return to schools and nurseries, universities will remain closed but students can continue classes online, Macron said.

n Harvard

University, one of the world’s best and richest higher education institutions, will receive $8.6 million in government aid to help it cope with Covid-19, despite having a $41 billion war chest.

EducationInvestor Global • April/May 2020

The Harvard Crimson, the university’s student newspaper, shared news of the federal aid, which is intended to stop businesses from collapsing amid the ongoing global health crisis, via its Twitter account on 15 April: “Harvard University will receive nearly $9 million in aid from the federal government through the Coronavirus Aid, Relief, and Economic Security Act, the Department of Education announced last week.”

The leaders of eight Hong Kong n universities have said they will donate portions of their salaries to help their institutions weather the financial impact of the Covid-19 pandemic.

The president and vice-presidents of the University of Hong Kong, Polytechnic, Lingnan, Education and Open universities said they would donate 10% of their annual salaries to combat challenges ushered in by the coronavirus.

Among heads to have committed to salary deductions is that of City University, which has also warned of a freeze to staff salaries next year due to a drop in revenues.

n International

Baccalaureate announced its May examinations scheduled for between 30 April and 22 May for diploma programme and career-related programme candidates will no longer be held.

Depending on what they registered for, students will be awarded a diploma or a course certificate which reflects their standard of work. IB stated: “This is based on student’s coursework and the established assessment expertise, rigor and quality control already built into the programmes.”

The universities of Cambridge n and Oxford are both replacing this summer’s exams with online assessments, The Guardian has reported.

Cambridge students who cannot do this due to “illness, caring responsibilities or technical difficulties” are to be allowed to undertake the assessment later when the university is fully operational again. However, the university added that students won’t be allowed to defer their assessments until the next academic year. xxx

n The

UK’s early years sector has called on the government to offer “far more help” to nurseries that will struggle to survive forced closures induced by the coronavirus pandemic.

This came as the government announced that nurseries across the country will be eligible for a business rates holiday for one year from April – a break offered to businesses in other sectors.

Business rates are a tax levied on properties used for business purposes. The tax varies in size, depending on a business’s ‘rateable value’.

But chief executive of the Professional Association for Childcare and Early Years Liz Bayram said providers were “extremely worried” about surviving the temporary closures.

“The support already announced by government will help, but far more is needed to ensure childcare providers can survive this period of closure and rebuild the service so many families rely on to balance work and home, once we have beaten covid-19,” she said.

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GLOBAL: INDUSTRY VOICE

Path to the new way The global pathways industry is a staid one in which face-to-face delivery models have remained largely unchanged for nearly three decades. But since international travel bans have stemmed flows of foreign students, the sector is in dire need of disruption from online providers, argue Abhinav Mital and Amit Garga, co-founders of LINC Education

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EducationInvestor Global • April/May 2020

GLOBAL: INDUSTRY VOICE

FIGURE 1: DEMAND FOR INTERNATIONAL UNIVERSITIES IS LARGE AND GROWING

~750-800K

~300-320K

ROW (530K) Sub-Saharan Africa

Arab States

SE/East Asia/ Pacific (335K)

Continuing students (~450-480K)

• International student enrolment growing at 6% Direct admissions (~280-300K)

South Asia (465K)

China (720K)

International students in ANZ, CA, UK and US (2019E)

• Indians and Nepalese account for 75%

Intake (~300-320K) Pathways (~20K)

South Asian enrolment (2024F)

South Asian enrolment by programme (2024F)

T

he last week of February is usually the busiest time on campus for Australian universities as they prepare to welcome thousands of international students, largely from China, for the start of the academic year. In the midst of this activity is the university’s pathway college, which accounts for a large proportion of international student intakes, sometimes as high as 50-60% for certain programmes.

However, the mood was remarkably different this year as Australian universities braced for an unprecedented event – a complete travel ban from China due to the Covid-19 outbreak.

As a consequence of the measures, a large proportion of more than 200,000 Chinese students would miss out on the festivities of enrolment week, and worse: the start of classes.

Pathway colleges that typically run in partnership with private providers are the worst hit as they are almost exclusively for international students, the majority of whom come from China.

With technologies available today, can pathway operators and universities safeguard themselves against such black swan events – and, more importantly, innovate to further expand the market while preserving quality?

A brief history For the uninitiated, pathway colleges have become an integral part of universities around the world as a way to expand their international student intakes. This is especially relevant for students coming from countries like China, Korea, Vietnam and others, where language barriers and the structure of the local education system limit the ability of students to meet direct admission requirements. The concept was pioneered in the mid-1990s by education entrepreneurs, who convinced universities that international students who failed to meet

EducationInvestor Global • April/May 2020

• South Asian enrolment growing at 12%

Source: UNESCO data on student mobility, LINC research

~2.3m

• ~2.3 million international students are enrolled in Western countries; 20% are from South Asia and growing at 10-12% p.a.

• China slowing down (5%) • Pathways market growing at similar pace

direct admission criteria could still be admitted on the condition that they complete a pre-university foundation programme or a first-year equivalent diploma. The real value-add, though, was that private companies like Navitas served as the perfect proxy to go deep into source markets, like China or Southeast Asia, and work with agents to recruit larger numbers of students on the back of reduced entry requirements. Today, we find some of the biggest private education companies, including Navitas, Study Group, INTO and Cambridge Education Group, operating in this segment, with 50,000-60,000 students studying in pathway colleges around the world. The segment has grown at 7-8% year-on-year – approximately 200-300 basis points faster than overall international student enrolments. It is noteworthy, though, that pathway intakes still account for only a sliver of the nearly one million students starting at western universities and colleges each year, indicating potential runway for growth. At the same time, the teaching model remains extremely traditional, as it relies heavily on classroom lectures and examinations and has seen little innovation in delivery since the first pathway college was started 25 years ago.

Cracks in this model have emerged as demand is shifting to new source markets, notwithstanding the aforementioned Covid-19 pandemic. Based on the most recent data on international student mobility from UNESCO, enrolments from South Asia to western higher education institutions grew at 12% – twice as fast as the world average, and significantly faster than China (see Figure 1). Universities and pathway providers are turning to India, Nepal, Bangladesh, Pakistan and Sri Lanka to compensate for the slowing demand from China and to enhance classroom diversity.

▶

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GLOBAL: INDUSTRY VOICE

▶ In 2018, 1.8 million students took the academic IELTS, of

price-points as a way to self-select higher-quality students, whom approximately 250,000 were from South Asia and but effectively close the door on equally qualified students scored 5.5 or 6.0, which is the typical pathway admission who cannot afford them. Pricing is no doubt effective in controlling authenticity of applicants, but does not guarantee criteria. However, it is estimated that less than 3% of test student readiness and success. Some universities have made takers actually joined a pathway programme – indicating matters worse by dropping direct admission criteria in order massive unmet demand to be tapped.

At the same time, institutions have demonstrated a to access these growing markets, which means that the limited ability to decipher student quality – both in terms pathway college now has to further lower its own admission of authenticity and calibre. Most rely on a network of study criteria while still maintaining the same progression or abroad agents, many of whom turn out to be untrustworthy. success rates amongst students.

LINC Education’s own experience from working with a With nearly 500,000 students coming from South Asia, it number of pathway colleges to provide is clear that western education is not just supplementary one-on-one academic restricted to the cream anymore, thereby putting the pathway model at greater risk tutoring to students has shown that, Pathway colleges than ever before from student quality and despite best efforts, institutions end have become completion standpoint. up with cohorts in which 10-20% of students never show up for classes, an integral part Technology as a force while another 30-40% end up failing of universities multiplier? their first-term qualifications. Most around the world of these students eventually switch to One solution adopted by universities to as a way to expand cheaper or ‘easier’ courses elsewhere in improve the quality of students coming their international the country to maintain their visa status as to their campuses is to run feeder they pursue their path to employment or programmes in source markets through student intakes their own campuses, joint programmes immigration. As a result, the institutions or twinning programmes. But typical are left with less than desirable teaching & learning metrics (failure rates, attrition, flow-throughs are very low. Besides, continuation) and sub-par progression rates to university running your own campus in a geography as vast as India or Bangladesh is not everyone’s cup of tea due to a multitude programmes. In the worst-case scenario, colleges run the risk of getting their immigration status downgraded by of reasons. authorities, which would result in tighter restrictions around This is where technology can play a game-changing role future international student recruitment. and potentially disrupt how student pipelines are built in source markets like India and the broader region. By offering The response from a number of universities and pathway a part of the foundation, diploma or first-year subjects online colleges has been a bit knee-jerk. It ranges anywhere from to students meeting basic entry requirements, providers shutting down specific agent relationships all the way to can test the quality and readiness of students even before black-listing entire regions or even countries for recruiting they pack their bags. These programmes can be offered as students. Top-end universities, like the G8 in Australia or the Russell Group in UK, leverage their ability to charge high early as the student is ready to apply overseas and a perfect

Abhinav Mital, LINC Education

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Amit Garga, LINC Education

EducationInvestor Global • April/May 2020

GLOBAL: INDUSTRY VOICE

way to lock in the student during the time between school graduation and start of the academic year in Australia. Priced right, such online solutions can expand the addressable market as the overall cost of education (tuition and living expense) stands to come down anywhere from 15-30%, which translates into a massive increase in potential volumes. At the same time, it helps boost the quality of students coming on-campus. If the student succeeds, they end up saving time and money since their on-campus duration reduces, while the probability of success increases significantly.

If they don’t, then the cost of failure is not as high and they can invest more time in readiness before they step on campus, again leading to improved chances of success. A third benefit is that such programmes can help providers expand their on-campus capacity as part of their student body is now online.

The challenge, of course, is to deliver programmes that preserve the education quality, authenticity and efficacy to ensure students meet the approved learning outcomes.

Unfortunately, online delivery has become synonymous with self-learning and that model will surely fail for young students looking to go overseas. The desired online learning environment needs high levels of academic engagement, or ’facilitation’, from qualified academic professionals

EducationInvestor Global • April/May 2020

who support the student each step of the way, just like teachers do in a face-to-face environment. LINC Education’s own experience of delivering online courses on behalf of universities proves that one-on-one academic engagement leads to superior outcomes and completion rates which will be critical in online pathways. However, this is not a capability commonly found in universities, let alone pathway providers, which are either absent in the online space, or have mostly leveraged online channels to expand their selflearning programmes.

Academic leaders and decision makers faced with nearempty classrooms are waking up to the potential of online delivery for international students. However, if they limit it to contingency planning, then they have missed the forest for the trees. Online pathway programmes can structurally change the ways in which universities and pathway providers think about international student enrolment and success.

They can open up not one, but multiple pathways into the university based on student performance and readiness. They can bring the dream of overseas qualifications to a much larger student base, rather than restrict it to a handful. It is not a matter of if, but when this change takes place – and the question is who will make the first move: pathway providers, universities or an outsider? n

23

GLOBAL: ED TECH

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EducationInvestor Global • April/May 2020

GLOBAL: ED TECH

A time to shine Ed tech platforms are bridging a crucial gap between educators and learners amid widespread global closures that have severely disrupted brick-and-mortar providers. A surge in uptake of online education will outlast the Covid-19 pandemic, writes James Local, managing director at investment bank Houlihan Lokey, who foresees significant long-term wins that should accelerate growth and investment in the sector

T

he Covid-19 pandemic is a having far-reaching this period of disruption as an inflection point that significantly impact on how we live our lives. accelerated the adoption of technology in education.

Lockdowns around the world have led people to This article explains why we expect to see a long-term impact from this current disruption, what that impact might look for new ways of doing everything, from socialising be, and highlights some subsectors to keep an eye on. and working through to learning and shopping. Almost every aspect of our lives has become digitised and we are What has driven adoption so far? all a captive audience for digital platforms that help us There are some common themes and underlying drivers adapt to this way of living.

The way we are learning is also changing. Education that help explain the varying levels of adoption and is an intrinsic part of human society commercial success of technology in and, far from diminishing demand, this education to date: Addresses a real need: Must-have crisis is demonstrating the robust need solutions with a clear purpose that address for education and learning.

Despite the needs of learners, educators, and other Alongside a remote workforce, there global ubiquity of are now 1.6 billion academic students stakeholders, such as digital safeguarding education, only unable to attend school or university, solutions rather than being just nice-toaccording to UNESCO. This has created have products that lack impact.

3% of spend in an unprecedented surge in the use of Right tool for the job: Where identified education is on technology in education and the market needs and product capabilities converge, technology is relying on ed tech to help it meet rising rather than the use of tech for tech’s sake. demand from a global audience.

This includes the use of online learning to For some time, ed tech has been a deliver training to a dispersed workforce sector full of aspiration, promise, and in a highly regulated end market. opportunity, yet adoption of technology in education Improves outcomes: Solutions that demonstrate their has not kept pace with other sectors. Despite the global worth by delivering measurable outcomes and ROI through high-quality and highly relevant content. Solutions may ubiquity of education, only 3% of spend in education is fail where learners lack engagement; there is little tangible on technology, according to HolonIQ. evidence of improved outcomes if content is perceived The change in behaviours ushered in by this period of disruption is likely to have a profound and enduring impact to be generic or irrelevant. Good examples of successful on ed tech, even once the pandemic recedes. The Association models include data-driven assessment tools and adaptive of School and College Leaders has already labelled this as content providers. “a wake-up call about the lack of ed tech” in schools and, Ease of use and saves time: Successful solutions reduce in the midst of the crisis, 58% of ed tech businesses expect the workloads of educators and administrators, require to see a positive long-term impact. minimal adoption cost and effort, and complement rather than replace educators. Solutions that fit this category include And while it might be overly simplistic to say that this those that help students access devices, content, and learning current crisis will transform ed tech’s direction of travel, there are compelling reasons to suggest we will look back on experience (LXP) platforms with easy to use interfaces.

▶

EducationInvestor Global • April/May 2020

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GLOBAL: ED TECH

▶ What can we learn from the disruption caused by the coronavirus pandemic?

Persuading decision-makers to engage with solutions: This period of disruption is acting as a shop window for many platforms that find themselves serving a broader and more receptive audience than ever before.

Exposure is not just to administrators but to all users, including educators, HR managers, learners, and parents, many of whom are finding new digital tools becoming embedded in their daily life and importantly complementing – not replacing – educators.

These users now have the time and impetus to (re)learn how to use these tools, reshaping behaviours around them and developing enduring skills.

Evidencing impact: As organisations turn to their existing platforms, they are better understanding their capabilities and limitations. Functionality that previously was unused is now being explored.

The strengths and weaknesses of large platforms like Microsoft Teams and Google Classroom are becoming more apparent and there is thus a clear opportunity for smaller, high-quality, differentiated, and joined-up players to shine.

The longer this period of disruption lasts, the more reliant users will become on this web of services, which will afford technology providers the opportunity to demonstrate their educational value and win long-term customers.

Complex decision-making processes: For those organisations in the middle of a technology roadmap, decisions have been accelerated out of necessity.

If it wasn’t clear before, the must-have nature of learning technology has become a self-evident truth.

26

Many are finding that their current platforms are inadequate for their needs and, with daily usage, the key criteria for technology purchasing decisions is clearer than ever.

What long-term trends might accelerate?

High-performance learning platforms: Remote learning platforms are omnipresent in corporate and academic settings, but the potential of these platforms is often left untapped.

The importance of usability is well established and can be seen in the steady rise in platforms building consumergrade user experience. This has resulted in a doubling of the LXP market year-on-year, often at the expense of legacy platforms.

These platforms will be relied on by schools and employers in the coming weeks and months and used in new and more intense ways. For example, in the UK during school closures, secondary schools have adapted quickly with over 80% of work set via an online platform. However, 45% of work set in primary schools is still by physical worksheet and it is only in the private sector that more advanced technology, such as online chatting or live video, is being used. This adaptation will test the effectiveness of these platforms and those that create high levels of engagement, are well integrated and deliver demonstrable learning outcomes stand to benefit.

Lifelong and professional learning: Online training that is required for regulation, employment, or career enhancement is well established. With most of the workforce unable to attend face-to-face classes and potentially with more time on their hands, online courses are already seeing a surge in demand.

The most popular online course at Yale, ’The Science of Well Being’, saw more enrolments in March than in all of 2019.

EducationInvestor Global • April/May 2020

GLOBAL: ED TECH

Similarly, a European portal that matches students with Promoting Digital Safety: From contact tracing to Zoom learning courses generated more online leads during March bombing, the digitisation of our lives has brought high-profile than in any other month. privacy and security concerns to the fore. Safeguarding policies Adaptive content: Technology enables the creation of for schools and universities are mandated in many countries high quality, relevant, and fresh digital content at scale. The and online platforms have grown as more schools enabled use of this content online and for homework has become bring your own device and 1:1 programmes. The platforms that provide these services will increase in prevalence as we rely on well established, but providers of proprietary content are them to keep our digital lives safe, in and out of the classroom. now seeing significant surges in demand as teachers look Cloud migration: Despite state and government for ways to continue delivering learning remotely.

Learning as a retention tool: There has been an emergence encouragement, such as the UK’s ’Cloud First‘ policy, many in the role of learning as a tool for employee retention organisations haven’t fully embraced cloud or software as a and engagement. Aside from upskilling, service (SaaS) platforms, and, therefore, corporate learning opportunities are do not benefit from a lower cost base expected by employees, 93% of whom and improved agility. Many legacy Technology in would stay at a company longer if it solutions performing adequately and the education is invested in their careers, according to disruption of implementation has created stepping up to help LinkedIn Learning. No longer just the inertia. Before Covid-19, cloud services preserve of L&D teams, this crisis may in the K12 sector were expected to grow meet the ongoing mark the point at which online learning at approximately 30% annually and the demand from a clear service continuity and accessibility becomes a key concern of HR teams as a world of learners benefits will likely spur many customers to reward and retention tool at a time when in new ways spec SaaS and cloud solutions in the future. so many employees are away from their It is clear that the disruption caused by places of work.

Online tutoring and mentoring: Covid-19 is having a dramatic effect on Tutoring has surged in popularity in the how we live our lives.

K12 market, driven largely by parents who have looked to Technology in education is stepping up to help meet the supplement state-funded schooling without the full cost of ongoing demand from a world of learners in new ways and private education. Business-to-business platforms are also the longer the disruption goes on, the more behaviours will working effectively with tutors to provide rapid and robust be normalised. skill acquisition in areas such as language learning. Effective In time, the short-term surge will dissipate, the online tutoring platforms that connect tutors and students overwhelming reliance on these services will be reduced, in virtual classrooms are already in use and many will come and services that are currently free will be charged for. to rely on them in this crisis. India’s Byju’s has reported a However, the role of technology in education will be clear to 60% increase in new students, while one UK-based provider a global audience and many of the established and emerging delivered more online classes in March than in all of 2019. trends will have accelerated. n

EducationInvestor Global • April/May 2020

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GLOBAL: STUDENT MOBILITY

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EducationInvestor Global • April/May 2020

GLOBAL: STUDENT MOBILITY

Mapping global mobility trends in education As the number of outbound students seeking an education abroad rises every year, data indicates that the majority of this population comprises Chinese students. How can universities reduce their dependence on a single country as the biggest driver of growth in international student numbers? Ashwin Assomull and Sudeep Laad of L.E.K. Consulting highlight how India and other nascent markets offer promising potential and a means to safeguard enrolment rates for universities

A

n increasingly globalised world is seeing more and more students leave their home countries to secure university degrees from overseas institutions. About six million international students are enrolled in universities globally, and this cohort is expected to continue to expand.

Enrolments by overseas students have been growing consistently by upwards of 5% year-on-year, and with an ever-increasing demand for international exposure, this growth rate is expected to remain on the same trajectory.

Anglophone countries such as the UK, US, Australia and Canada continue to be the most preferred destinations for students seeking an overseas education, currently attracting 40% of the global student base.

Robust demand drivers underpin these gains. A growing proportion of households can afford an international education. In addition, the quality of English-language teaching outside Anglophone countries is still constrained in many markets, and the desire to migrate for better employment opportunities after obtaining a globally recognised degree continues to propel students overseas (see Figure 1).

Visa- and immigration-friendly Anglophone countries, such as Canada and Australia, are the fastest-growing markets for international student intake, while the US has slowed in recent years due to its anti-immigration stance.

EducationInvestor Global • April/May 2020

The UK market is rebounding due to a newly introduced post-study visa policy that allows students to seek work for two years after completing their degrees.

Countries such as the UK have good reason to reach out to international students, who pay more in student fees than domestic ones, with top-tier institutions in particular managing to charge higher tuition than lower-ranking schools. Moreover, universities are facing public funding constraints, and rely on their overseas customers as a means to maintain revenues.

Historically, universities were allocated funding based on their expected intake demand; as these numbers continued to grow, so did their coffers. However, with financial pressures and a view to improve the sustainability of higher education, such funding has been capped by many governments, driving domestic students to choose less-expensive private colleges over non-funded public ones. This makes the international student base all the more lucrative to higher education providers.

The Sino-Indian equation Asia has long been seen as a critical market for universities aiming to secure international students, with China and India accounting for nearly half of the international student base in Anglophone countries.

â–ś

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GLOBAL: STUDENT MOBILITY

FIGURE 1: GLOBAL MOBILITY TRENDS IN EDUCATION

Trends in international higher education

6 million international students enrolled in higher education globally

>5% annualised demand growth year on year over last 5-10 years

40% share of Anglophone destinations (US, UK, Australia, Canada)

Demand drivers Rising household affluence Demand for quality English education Access to topranked foreign universities Career premium with overseas qualifications

Supply drivers

Funding constraints for universities Higher fees for international students Conducive visa regimes Ease of immigration

Key source markets 30% of total demand is from China and India

China | India | Vietnam | Malaysia

Note: National government datasets (highest quality) have been used for Anglophone destinations, for years published (2014-18). UNESCO data has been used for other destinations.

Source: UNESCO; HESA, Government of UK; SEVIS Department of Homeland Security, USA; DET, Government of Australia; Citizenship and Immigration Department, Government of Canada; L.E.K. research and analysis

▶

Given that these students make up a significant chunk of While growth from China has historically been strong, the international student base, institutions across the world a slowdown has been reported and further anticipated due to a number of factors, such as demographic decline and should develop an imperative de-risk approach to safeguard moderation in economic growth. their enrolment rates, hence diversifying student intake.

Moreover, China has successfully been investing in Meanwhile, China’s neighbour India seems very well poised improving the quality and ranking of its universities for nearly to step in and handle the shortfall (see Figure 2). a generation, with ambitions to achieve 40 universities within Globally, Indian students now comprise the second-largest the top 200 by 2050. The country is now attracting nearly group of outbound international students, with more than 400,000 seeking places abroad. This number is growing faster 500,000 inbound international students per year – growing than nearly any other outbound population internationally, at at 10% a year – indicating the attractiveness of its domestic higher education market. Not only that, roughly 15%-20% year-on-year since 2014. but a number of foreign institutions are opening up partnerships in China, creating Understanding the Indian affordable and more proximal alternatives student to studying abroad, thus moderating the In order to effectively reach Indian China’s neighbour phenomenal growth in overseas enrolments students, global universities and higher India seems very which was the trend in the past decade. education platforms need to understand well poised to step the factors motivating this group and And while gaining English fluency is a in and handle major driver for enrolments in Anglophone tap into regional networks, with agent the shortfall countries, there has been growth in the management as a priority. number of bilingual schools that provide Based on consumer research, Indian English-based education at the primary transnational students have different and secondary levels. In addition, options motivations for studying abroad.

One cohort of students focuses on for learning the language are constantly academic attributes, and chooses programmes by the brand increasing in China, with the proliferation of apps such as Liulishuo and online English-language training providers like of the university or for the target discipline. These students VIPKid. This has specifically had some impact on demand for are typically drawn to top-ranked universities because these foundation and preparatory courses, hitherto popular among schools match the students’ superior academic performance.

Chinese students.

Moreover, they thoroughly analyse course structures and In addition, more recent developments, such as the US-China are cost conscious. While they are willing to pay a premium trade war and its negative impact on the Asian country’s for top-quality schools, they are self-driven and aware, and economic growth, are posing roadblocks to growth. there is limited scope to influence their decisions.

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GLOBAL: STUDENT MOBILITY

FIGURE 2: OUTBOUND INTERNATIONAL EDUCATION TRENDS IN CHINA AND INDIA Growth in international higher education enrolment – China and India (2015-2018E) Percentage

> 15% p.a.

< 5% p.a.

China

India

Economic growth

Threat of foreign in-country education

Student diversity considerations for universitities

Macro issues/world trade/visa

Note: Represents all students from source countries going to all destination countries Source: UNESCO; HESA; Department of Education and Training, Australia; Institute of International Education (IIE); L.E.K. analysis

For another large segment of students, the primary objective is to find tertiary education programmes that help them relocate from India. Typically, having low or medium scores, this type of student is likely to prioritise cost over reputation and depend on an agent, given students’ low awareness of opportunities abroad.

While there are students who are academically driven and attracted to top universities, a large part of the Indian student population is driven by the desire to emigrate.

This is in sharp contrast to China, where students tend to go back home after completing their education because foreign degrees command a higher premium in the domestic employment market.

Since migration is a strong motive, ease of acquiring exit opportunities and employment upon completion of studies is vital for Indian students (see Figure 3).

Indian students also tend to be more cost conscious, which implies that there is significant price sensitivity in this market. The direct result is that students tend to seek shorter courses, such as one-year postgraduate degrees, rather than more costly four-year undergraduate qualifications abroad.

Postgraduate students tend to put lower reliance on agents compared to undergraduate students. In addition, programmes that are flexible and help facilitate earning while studying are likely to be more popular among this student cohort.

EducationInvestor Global • April/May 2020

Unfavourable

Favourable

As Indian students typically opt for postgraduate programmes, and English is already taught widely at the school level, Indian students typically don’t face linguistic barriers. In fact, international schools in metropolitan areas such as Delhi, Mumbai and Bangalore are expected to burgeon into a $600 million industry, enrolling over 110,000 students in 2019.

The regulatory regime When deciding on a destination country, international students principally take socio-political factors, the quality of universities, cost and visa availability into consideration.

More favourable post-study work visa regimes have Australia and Canada taking a higher share of the Indian student population than the UK and US, which have hardened their anti-immigration stances in recent years.

This mix is changing fast, though, with recent regulatory changes altering the landscape. The UK is beginning to lure overseas students once again, with Prime Minister Boris Johnson’s government taking a number of steps to rehash the country’s immigration policy. The country recently introduced a point-based system for skilled immigration. While the general idea is to promote skill-based immigration and curb low-quality immigration, this is likely to increase the UK’s competitiveness, in comparison to other Anglophone countries.

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GLOBAL: STUDENT MOBILITY

FIGURE 3: INDIAN STUDENT PROFILES

Seeking overseas job opportunities with a preference for migration

▶

Preference for cost-effective PG programmes

Price-sensitive

Australia remains a popular destination, but regulatory changes are afoot. While some of the recent changes have meant tighter scrutiny of students on merits as well as financial stability, this is not likely to deter demand.

Moreover, recent statements by the Australian government also indicate that international students and other migrants could be incentivised or compelled to settle in regional and rural areas outside of urban hubs such as Sydney and Melbourne, providing a boost to regional universities.

Action plan for universities and higher education institutions Given the tremendous potential posed by an expanding Indian student population, here are some steps universities can take to make their value proposition even more attractive (see Figure 4).

• Shorter, cost-effective programmes: Degrees awarded at a lower cost and achieved in a shorter period of time continue to bring Indian students overseas, as these provide better return on investment. UK institutions, including top-tier universities, have been successful at attracting Indian students to one-year master’s degree programmes, which are about 60% cheaper than similar qualifications in Australia.

• Liaisons: Institutions will need to ensure that there is enough awareness among agents about the value proposition they offer. This means that in addition to offering attractive commissions, increasing student

Relatively better access to English language (as compared to China)

outflow from agents will require active engagement.

This can be achieved by building relationships with large agents, training agent counsellors to ensure the right message is communicated to potential students, providing on-the-ground sales support, and participating in fairs and conferences to increase brand awareness.

• Local admissions teams: Given that the Indian agent market is relatively fragmented, with few large players active in the market, universities should consider having an in-country model with a specialist admissions team on the ground.

• International schools: International curricula are gaining share over local systems, as parents are increasingly preferring an overseas undergraduate qualification for their children. Subsequently, a majority of children enrolled in such schools pursue a foreign degree. Rising affordability has also brought these schools within the grasp of many households. In all, these schools provide a pipeline from which universities can source future students. Universities could also consider partnerships or tie-ups with such schools to ensure a steady stream of students.

• Marketing: Universities would do well to put money in online advertisements to build their brand profile and make themselves more visible to Indian students.

Spending on search engine optimisation would help improve visibility in Google searches, while Facebook ads and physical brochures and fact sheets at agent offices could also help expand reach and recognition.

FIGURE 4: STEPS UNIVERSITIES CAN TAKE TO MAKE THEIR VALUE PROPOSITION MORE ATTRACTIVE

Offer shorter and costeffective programmes

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Build liaisons with key agents

Deploy a local admissions team

Target premium and international schools to source students

Invest in online marketing activities such as SEO

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Looking beyond India While China and now India have proven to be the biggest drivers of the growth in international student numbers, there are a number of other nascent markets. Here is a brief look at each of these regions.

Latin America: The region is becoming a popular source for transnational students to Anglophone countries, although Spain and Portugal also continue to be attractive because of linguistic similarities. Outbound international students from Latin America to Australia, for example, grew at 5% from 2014 to 2019, largely driven by growth in Brazil.

Nepal: Outbound enrolment from the country is expected to grow at 10%, driven by rising affordability. Australia is the destination of choice for Nepalese students due to the presence of previous diaspora, which help secure employment opportunities.

Vietnam: The number of students from this Asian country is expected to grow abroad as improved affordability increases access.

Middle East & North Africa: About 30% of international students from the Gulf Cooperation Council or the Middle East and North Africa region head to Anglophone countries, although Abu Dhabi, with its growing base of foreign university campuses, is emerging as a competitor in its own right.

In conclusion, universities and higher education platforms would do well to reduce their reliance on

China, given its slowing growth, and turn their attention to other markets. Of all these, India holds the most promise, being closest in size and economic might to China. While India presents a tremendous opportunity, universities should allocate time and money to better understand the parameters of the local market and tailor their offerings to appeal to an extremely price-conscious population that is most intent on securing high-paying jobs and even passage out of the country. In addition to India, other source markets such as MENA, LATAM, Vietnam and Nepal could be included in the mix of international student recruiting to de-risk the portfolio.

Impact of coronavirus on international student flows While it is too early to fully evaluate the exact impact of Covid-19 on demand for international education at this stage, we would expect a significant decline in AY 2021 enrolments. As governments across the globe (both in source and in destination markets) implement various measures to curb the spread of the virus, the impact on students, teachers, parents and schools is already being felt.

Whilst the long-term outlook for international student flows remains robust due to the fundamentals described in the article above, the economic impact on household income and affordability in key destination markets in the short term cannot be underestimated. n

Ashwin Assomull and Sudeep Laad are partners in L.E.K. Consultingâ&#x20AC;&#x2122;s global education practice. Contributors to the article edit include Hitakshi Arora and Akansha Baradiya.

L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. The L.E.K. global education practice is a specialist international team of 60-plus consultants and seven partners who have completed more than 700 education sector engagements across more than 90 countries, serving CxOs and boards of some of the worldâ&#x20AC;&#x2122;s largest education organisations. Our experts bring insights on education businesses, investment opportunities, market dynamics and impact across segments from K12 to ed tech.

For feedback or comments on this piece, please contact Ashwin Assomull at a.assomull@lek.com or Sudeep Laad at s.laad@lek.com EducationInvestor Global â&#x20AC;˘ April/May 2020

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EUROPE: PRIVATE EQUITY INVESTMENT

A very private problem The Covid-19 pandemic has thrown the UK education sector into a state of flux, as providers face a cash crunch that could prove fatal for some. Deal flow has dried up, and buyout houses with hundreds of millions of pounds invested in the market are bracing for widespread losses, writes Josh O’Neill

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T

hese are peculiar times for private equity funds with eyes on the UK’s education arena.

Businesses across the sector are facing significant liquidity issues as the economic shutdown brought on by Covid-19 has crippled cash flows. On the one hand, such conditions present opportunities for bold buyers to snag undervalued companies, as periods of economic tumult always do. But on the other hand, it is extremely difficult to execute deals at present because organisations whose revenue channels are in flux are nigh on impossible to value accurately. Plus, private equity investors tend to at once own several businesses in numerous industries. Most are too preoccupied with the performance of their existing portfolios to think seriously about expanding them.

“Our most pressing concerns are the well-being of staff at portfolio companies, their ability to handle operations remotely if working from home, and cash monitoring if revenues are hit,” says Rob Simpson, partner at Apiary Capital, a Londonbased private equity house that owns Bertram Nursery Group, a chain of more than 35 nurseries in Scotland and the north of England. The UK government ordered most nurseries and schools to close on 20 March for an indefinite period as part of a wider measures intended to curb the spread of Covid-19.

“Once the level of revenue hit can be estimated, our attention would turn to strategies to reduce cost in order to manage cash,” Simpson explains.

EducationInvestor Global • April/May 2020

Like many other UK business, education providers and the supply chain supporting them are facing a cash crunch, as economic inertia has prompted individuals and organisations to reassess their spending on education and training amid a nationwide lockdown. Nurseries, schools, tutoring networks, colleges, pathway companies, universities – all are bracing for losses, as widespread closures and social distancing measures have prevented them from delivering their products for months.

As fund managers try – along with hundreds of thousands of other business owners across the country – to get a handle on their companies’ hammered financials, the education industry can expect a significant lull in private equitybacked transactions in the weeks and months to come. As the coronavirus pandemic shows no signs of abating, buyout houses are busy working on business interruption plans and deciding into which portfolio companies to inject life-saving capital. This is weighing on their ability to do deals.

Several transactions that were in play have stalled. Sources say that the sale of Oxford International, the pathway provider owned by mid-market buyout house Bowmark Capital, has been shelved until the impact of the ongoing pandemic on the organisation’s bottom line is known. Other private equity-owned education businesses that were brought to market last summer, such as the British Institute of Modern Music and apprenticeship provider Lifetime Training, are yet to secure buyers.

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EUROPE: PRIVATE EQUITY INVESTMENT

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“No one wants to catch a falling knife; there is a lot of of leverage, or debt, to generate outsized returns for deal orchestrators. According to management consultancy Bain, fear in the market,” says Martin Luen, managing director more than 75% of private equity buyouts executed last year had at Baird’s European investment banking division, who has advised on a number of leveraged buyouts in the sector. debt multiples higher than six-times target companies’ earnings.

“Private equity buyers are still worried we have not yet hit This ratio had increased every year since the 2008 recession.

Banks are factoring in inflated risk levels by attaching the bottom. This concoction of low buyer confidence and uncertainty around timing of a recovery means M&A volumes a premium to loans, according to Chris Smith, partner at in the next three months will be very thin.”

Clearwater International’s debt advisory unit. “The cost of Private equity’s plate is full. At the heart of this economic funding from banks has gone up by 100-150 basis points,” rut is a paralysed labour market. Through their portfolio he says. This could prompt private equity investors to lean companies, private equity investors indirectly employ harder on debt funds, which over the past decade have taken thousands of staff in the UK education sector, many of a growing share of the credit market from banks. Debt funds whom are being cut loose or furloughed so that government have a mandate to make loans, otherwise they do not earn funding can be accessed. Externally, education providers are management fees. Therefore, they are more willing than being bombarded by clients – be that fee-paying parents or banks to lend capital to finance leveraged buyouts during large corporations – that have seen their incomes shrivel a crisis, according to Smith. They are also able to provide more money. A private equity buyout that up in recent weeks and are thus seeking reimbursements or trying to cancel might require capital from two or three contracts entirely. banks, which seek to spread risk, could be financed by a single debt fund, meaning “The number-one priority right now is We could see a cash flow,” says Luen. “Most education they are nimbler in a deal process. But they situation at the businesses are receiving fewer deposits tend to like larger value deals, and their end of all this in and receipts and less cash than they would loans come at a premium: “Minimum 6% which there are ordinarily expect, but at the same time, [interest], plus fees,” says Smith. Higher businesses with they still need to pay their teachers or interest rates and a lack of readily available instructors, rent, bills and, in some cases, debt are not conducive to fast deal flow. more debt than offer cash refunds. Their private equity “It’s going to be really difficult to do they are worth investors are critically focused on having deals in the next three-to-six months,” he enough cash to continue to operate for says. “We’re going to see quite a significant the next six months, especially as most drop in deal volume.” Once the pandemic of them will have interest and debt repayments they need subsides, there will likely be a significant adjustment in the levels of debt used in leveraged buyouts, he adds, which to make during this period as well.”

Bullish buyout funds on the prowl for undervalued could require private equity funds to put in more of their own businesses amid a recession could have difficulty accessing money – something they don’t like to do. “Leverage multiples debt at an acceptable price. Banks’ appetite for risk has will go down and pricing [of debt] is likely to go up,” he says. quickly diminished (see page 14) in correlation with the “Utilising debt only to fund acquisitions will probably cease pandemic’s upward trajectory. This is evidenced in the as lenders will want additional equity investment.” residential mortgage market, where some lenders are now An industry built on debt requiring home buyers to put down as much as 40% of a That covers the near future in terms of deal flow – but property’s value to get a mortgage.

Restricted access to cheap debt is problematic for the what about the present? How will private equity-owned private equity investment model, which relies on high levels education businesses fare between now and the end of the pandemic?

Leveraged buyouts, as the name would suggest, place large sums of debt on acquired companies’ balance sheets.

Debt isn’t necessarily bad; world economies feed on credit.

But during periods of recession, vast debt obligations can be dangerous if money isn’t coming in. The UK government has stepped in to keep the country’s economy afloat by guaranteeing citizens’ incomes and extending favourable loans, grants and tax holidays to businesses. But the reality is, most businesses – education providers included – will end up taking on more debt of some form.

“We could see a situation at the end of all this in which there are businesses with more debt than they are worth,” said Simon Hitchcock, managing partner of Horizon Capital, a London-headquartered private equity firm that owns education software and services provider Juniper Education.

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A cautionary tale of such a scenario lies in Laureate Education, a university operator once controlled by a private equity firm. In 2015, under the ownership of KKR, Laureate’s debt-to-equity ratio reached 12.62. Now, as a publicly listed company, this figure stands at 0.74 after the firm spent three years selling off large assets (see page 16) across the world in order to clear debt from its balance sheet.

High levels of leverage, particularly during a recession, exacerbate cash flow issues and heighten short-term operating risks. Arun Kanwar, partner at London-based education consultancy Cairneagle Associates, says: “A frightening number of education businesses are leveraged to the hilt and are in danger of running out of cash and/or breaching their covenants. No doubt, we will see a number of these get close to the wire. We are already hearing about a number of businesses which are in trouble.” The government is pressuring banks to be extra-lenient with debtors, but private debt funds are largely unregulated and could act forcefully if covenants are broken. Depending on the terms of a contract, banks and debt funds could have the right to seize equity stakes or entire companies in the event of a defaults, if all other refinancing options have been exhausted.

These are sombre prospects. But there is also reason for optimism.

Operating conditions in the UK education market, combined with downward pressures in the credit market and lacklustre demand from investors, should lead to corrections in asset pricing in certain sub-sectors. For instance, the private school sector, which in the past 24 months has seen several organisations sell for more than 20-times their earnings, is now facing headwinds as fee-paying parents seek refunds and discounts (see news section). This could translate to widespread revenue losses across the sector, which in turn would bring down the value of school operators. Good news for buyers, bad news for vendors.

But many argue that such a correction is long overdue.

“Pricing must equalise,” said Jason Zemmel, partner at law firm CMS, who specialises in private equity transactions. “But, actually, pricing will be but one aspect of the brave new world. M&A is always about risk allocation. How parties address that – with the proverbial sword hanging over future profitability and returns – means that investors will look to share the risks inherent in any future transactions,” suggesting funds may increasingly look to invest alongside others in joint acquisitions.

Once normality resumes and financiers can once again act with confidence, private equity investors will undoubtedly look for cut-price businesses that survive this economic apocalypse, as they did in the wake of the last global crisis.

But for now, the immediate future for deal-making in the education sector looks bleak. Most – if not all – of the UK’s largest professional services firms and legal houses are looking at ways to shore up their balance sheets by furloughing staff or putting them on unpaid leave. When transaction-hungry advisors are left twiddling their thumbs, one knows there is something seriously wrong. n

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MIDDLE EAST & AFRICA: FOREIGN DIRECT INVESTMENT

A decree of unconfidence International investors with eyes on Egypt’s booming international K12 sector are jittery after government introduced a new decree capping foreign ownership of schools at 20%.

Have authorities poured too much cold water on a hot market, asks Josh O’Neill

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P

rivate equity investors with stakes in Egyptian school groups are worried. Overseas investors with intentions for the country’s fast-growing K12 market are anxious, too. Not because of the coronavirus crisis that has prompted governments worldwide – including Egypt’s – to shutter tens of thousands of schools, but because of a decree that was quietly introduced late last year.

The new legislation stipulates that foreign investors’ holdings in Egyptian schools must not exceed 20% – lowering significantly what were previously uncapped ceilings over foreign direct investment (FDI) in the country’s lucrative private school sector. If enforced retroactively (which is looking unlikely), the decree could affect school groups owned by GEMS Education and SABIS, which have foreign private equity capital behind them, and CIRA, a publicly listed operator of nearly 20 schools. Meanwhile, it could prompt overseas investors to turn their backs on the market, at a time when FDI volume is poised to plummet as the Covid-19 pandemic intensifies. Liquidity is quickly drying up and investors are taking stock as their desire to do deals diminishes – exacerbating the impact of any negatively perceived changes to investment laws.

Private equity investors see the decree as punitive because they tend to take full control of the businesses they acquire.

A 20% slice of a company shared with a domestic partner, in most cases, will not satisfy their appetite for outsized returns.

One partner of an international buyout fund that owns an Egyptian education organisation told this publication, on the condition of anonymity, that “we are revising our entire strategy for investing in the Egyptian education sector because of this [decree]”. The person described the legislation as “a negative signal” from authorities and said it “absolutely” has the potential to deter other private equity funds from entering Egypt’s education market. As an overseas investor, “I would be very worried” about buying into Egypt’s school sector now, the person said.

Over time, governments in emerging markets tend to open further their doors to FDI – not close them – to boost activity in targeted industries, or to finance infrastructure projects that cannot be funded with public cash. Dubai, for instance, in late 2018 removed a 50% limit on foreign investment in education assets to enhance international schooling provision and drive competition. Other countries in the Middle East and Asia – such as Indonesia, which has opened up its higher education sector to foreign funding – have made similar moves in recent years. So why is Egypt seemingly making its school sector less attractive to foreign financiers, when more favourable investment conditions are perhaps just a flight – or Zoom call – away?

Egypt is a predominantly Muslim country; around 90% of its citizens are followers of Islam. Governments of countries with strong religious elements engrained in their culture often have in place, or introduce over time, measures to safeguard it from forces they perceive as threats. Imported education has the power to shape young minds and can thus, over time, alter the fabric of a society. If authorities feel that foreign ideologies are encroaching on citizens of tomorrow, they may move to curb the institutions dispensing them.

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MIDDLE EAST & AFRICA: FOREIGN DIRECT INVESTMENT

▶ In 2018, China, a communist nation, prohibited “foreign

school groups are left entirely intact, there could be caveats going forward, Harb pointed out. When a school with foreign entities” from establishing or controlling primary schools in an effort to protect its national curriculum from owners comes to renew its operating licence every five years, overreaching Western influence (see EducationInvestor it could be subject to a review if any of the shareholders Global October, 2018). The party line suggests that Egypt’s change, he said. Harb likened this to know-your-customer rationale is comparable. checks implemented in the banking sector, which are designed Official statements translated from Arabic cite the to prevent the flow of illicit funds and to root out money “protection of national security and educational goals, laundering. “Going forward, you should know exactly who by preventing the acquisition of Egyptian schools and your investors are and immediately declare any shareholder protecting the identity of students and children from some changes.” Questions remain around whether future school wrong practices”. This is a curious standpoint, however. If acquisitions by existing foreign-owned groups will be permitted. “Anything can happen,” said Harb. their concerns were related only to educational outcomes and students’ identities, why not simply place additional A step too far? regulations around curricula?

Note that the decree was published just months after Between 2006 and 2008, Egypt’s population grew at a the Egyptian American Enterprise Fund took a 49% stake healthy rate of 2.6% a year. This led its government to announce in 2018 that some 2,500 schools would need to in the Nermien Ismail school group, and a fund operated by the National Bank of Kuwait bought two language be built each year through public-private partnerships to school chains. These deals were worth millions of dollars. absorb new entrants to the schooling system. That year, Perhaps authorities began to worry that such sums could GEMS Education, the United Arab Emirates’ largest forprofit school operator, struck a $56 million agreement with carry social or political sway.

Regardless, “the message is straightforward: they are Talaat Moustafa Group, a domestic construction firm, to in control of the industry”, said Johnny acquire a portfolio of schools, evidencing Harb, chief executive of Africa Crest the willingness of Egyptian authorities Education, whose shareholders include to embrace international school groups A 20% stake might Dubai-based school chain SABIS and a and their funders. According to Oxford meld of public and private investment Business Group, private schools, which get you a seat on the companies. Africa Crest Education owns collectively enrol around two million board, but it won’t give 75% of one school in Egypt, and 35% students annually, make up just 1% of you anything close to Egypt’s school market, in which there in another, both of which are operated majority voting rights are around 56,000 public institutions

by SABIS. “But when you are investing within the shareholder through a private equity fund, unless and 9,000 religious schools. you have a network [of schools] that Considering how small the private community generates hundreds of millions of dollars, sector’s share of the market is, one may a 20% stake is not going to work. reckon the new decree is overly onerous.

Moreover, it was published without “This could absolutely be a deterrent any prior industry consultation – a sure-fire way to rile [to other private equity investors]. A 20% stake might get up investors, who don’t take kindly to being blindsided you a seat on the board, but it won’t give you anything close to majority voting rights within the shareholder by new rules and regulations. Ross Barfoot, partner at community.” When it comes to leveraged buyouts, the international law firm Clyde & Co, said the uncertainty funds orchestrating them tend to want it all or not at all. caused by the legislation could hinder future investment Harb told this publication that Egypt’s Ministry of Education and lead international investors to seek out opportunities (MoE) has set up a committee to review existing shareholder in other African and Middle Eastern markets, such as structures of school groups with foreign capital behind Saudi Arabi and the UAE, where laws around FDI are less them, as well as new entrants to the sector. He understands stringent. “Even with the prospect of exemptions, the decree has created a huge amount of uncertainty – and investors that the decree will be “grandfathered” – meaning existing operators would be exempt from the rule, if this is true. don’t make decisions when they’re uncertain,” said Barfoot.

(The MoE did not respond to an interview request.) The “The ease of doing business and legal protections are both rule will apply to any schools – national and international factored into investment theses for school acquisitions and launches.”

– that charge fees and have foreign investors, said Harb.

Franchise agreements – whereby schools located overseas “We’ve submitted our paperwork and I am confident,” he can launch offshoots by essentially leasing their brand to said. “But I wouldn’t say anything is certain until I see the a domestic partner for a fee – will not be impacted by the paperwork.” This publication learnt that the committee had decree, explained Barfoot. “We’re aware of a number of its first meeting on 27 February, at which it reviewed seven exemption requests from existing operators. The committee those [franchise deals] that’re already underway and they’re is also considering granting future exemptions for “serious still going ahead,” he said. But “investors who were thinking investors” looking at Egypt’s school sector, it is understood. about pushing the button and going into Egypt are now However, even if the ownership structures of existing potentially waiting until there’s further clarity,” he added.

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MIDDLE EAST & AFRICA: FOREIGN DIRECT INVESTMENT

The decree aside, international schooling in Egypt remains of CIRA, which owns school groups Mavericks and Futures, a high-growth sector, propelled by a large supply of students as well as Badr university, said some E£300 million (£16 who at present have filled more than 80% of available seats, million) of expansion capital had been put at risk because according to data from consultancy EY-Parthenon. “New the Cairo-listed organisation has foreign shareholders. schools are ramping up well and offer lucrative returns on Partners of private equity firms that this publication has investment,” said Ayushree Agrawal, senior consultant at spoken with are concerned that similar adjustments could EY-Parthenon. “The underlying drivers, in due course be made to investment laws such as demographics and affordability governing other educational sub-sectors.

Actis, an international private equity group levels, are expected to grow… increasing The decree levels of participation and making Egypt’s that owns Africa-based Honoris United international K12 sector an attractive Universities, announced in late 2017 that has created a opportunity overall.” it would open a business school campus in huge amount of Cairo. This publication understands that Still, the unnerving message that the uncertainty – and decree has sent to international investors Actis is now reconsidering the launch investors don’t make – in particular private equity houses – for fear of restrictions being imposed on decisions when cannot be ignored. Buyout funds typically university investments later down the line. make investments based on a five-year If the global education sector is to they’re uncertain horizon, sometimes longer in the education recover fully from the coronavirus arena. Therefore, it is crucial they are infection, private capital from investors afforded a certain degree of confidence worldwide will undoubtedly be required – especially in emerging markets, where governments may that the lay of the land will not change drastically within not have the necessary financial firepower to resuscitate that time-frame. The decree has caused one private equity ailing businesses. Egyptian authorities did themselves no group to put on ice plans to invest more than $100 million in Egyptian schools, according to Enterprise, which also favours in failing to consult international financiers on reported that several other international funds have scrapped the decree. Their capital may be needed to keep schools plans to enter Egypt’s education market. The chief executive upright if the pandemic worsens. n

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41

FINANCE: DEALS

deals Online course marketplace for colleges raises $7m COMPANY: Acadeum TRANSACTION: Fundraising CONSIDERATION: $7 million Acadeum, an Austin, Texas-based start-up that provides a platform for colleges and universities to share online courses, has raised Series A funding in a round led by the Lumina Foundation, with participation from Rethink Education, LearnStart and Socratic Ventures.

Afya acquires Centro Universitário São Lucas COMPANY: Afya TARGET: Centro Universitário São Lucas TRANSACTION: Acquisition CONSIDERATION: The aggregate purchase price is 341.6 million reais, including the assumption of estimated net debt of 140.1 million reais, of which 70% is payable in cash on the transaction closing date, and 30% is payable in cash in three equal instalments through 2023, adjusted by the CDI (certificado de deposito interbancáriorate) rate.

Nova Lima, Brazil-based medical education group Afya has acquired Centro Universitário São Lucas, or UniSL via its subsidiary Afya Participações.

UniSL is a post-secondary education institution with governmental authorisation to offer on-campus, undergraduate courses in medicine in the state of Rondônia.

London-based buyout house acquires Learning Curve for £100m COMPANY: Agilitas Private Equity TARGET: Learning Curve TRANSACTION: Acquisition CONSIDERATION: Around £100 million Agilitas Private Equity, a London-based buyout house, has acquired UK apprenticeship provider Learning Curve, EducationInvestor Global exclusively revealed, wrapping up an auction process unveiled by this publication last year. This publication learnt that MML Capital Partners – Learning Curve’s previous private equity owner, which took a 50% stake in the business in 2015 – has exited the company following the close of a successful sale marshalled by Clearwater International.

Arbiter acquires FamilyID COMPANY: Arbiter TARGET: FamilyID TRANSACTION: Acquisition Sandy, Utah-based Athletic event management company Arbiter has acquired Boston-based FamilyID, which provides online registration for schools and community programmes.

Joint venture to acquire student housing COMPANY: Ashland Pacific and Integrated Capital Management TRANSACTION: Joint venture Real estate firm Ashland Pacific has formed a joint venture with Integrated Capital Management, an investment management firm, that will focus on acquiring and managing $150 million of student housing properties on the US West Coast. Both companies are based in Los Angeles. Ashland Pacific will be the managing member of newly formed Ashland Pacific Integrated (API) with primary responsibility for the venture’s day-to-day operations.

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FINANCE: DEALS

API makes its first acquisition COMPANY: Ashland Pacific Integrated TARGET: A portfolio of student housing assets TRANSACTION: Acquisition CONSIDERATION: $18 million Ashland Pacific Integrated has made its first acquisition, a portfolio of student housing assets located near the University of Southern California campus. The nine properties comprise 84 beds. Marcus & Millichap represented API in the transaction.

Bayswater Education acquires LSC COMPANY: Bayswater Education TARGET: Language Study Centres TRANSACTION: Acquisition CONSIDERATION: Undisclosed London-based education provider for travellers, Bayswater Education, has acquired Language Study Centres, The PIE News has reported.

Blackstone to buy student housing group in £4.7bn deal COMPANY: Blackstone TARGET: IQ TRANSACTION: Acquisition CONSIDERATION: £4.7 billion Global investment business Blackstone has agreed to buy the UK student housing company IQ from Goldman Sachs, City AM has reported, in what has been described as the largest-ever private real estate transaction in the UK. Blackstone is buying the business from Goldman Sachs, which owns 70% of the group, and medical charity the Wellcome Trust, which owns 28%.

Bloomsbury acquires Zed Books’ assets COMPANY: Bloomsbury Publishing TARGET: Zed Books TRANSACTION: Acquisition CONSIDERATION: Undisclosed Central London-headquartered Bloomsbury Publishing has completed the acquisition of certain assets of Zed Books, the London-based academic and non-fiction publisher.

BlueKey Equity Partners invests in student debt start-up COMPANY: BlueKey Equity Partners TARGET: Chipper TRANSACTION: Private equity investment CONSIDERATION: Undisclosed BlueKey Equity Partners, a small- to middle-market private equity firm, has invested in Chipper, a socially conscious company which helps transform the way student loan borrowers analyse, manage, and pay back their student debt. Chipper is headquartered in Austin Texas; BlueKey Equity Partners is based in Hollywood, Florida.

College lender Boro raises $12m COMPANY: Boro TRANSACTION: Fundraising CONSIDERATION: $12 million Boro, a Chicago-based provider of loan services and financial education to college students, has raised a Series A funding round led by LexinFintech, a publicly traded Chinese financial company, EdSurge has reported.

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FINANCE: DEALS

Cambridge College to acquire New England College of Business and Finance COMPANY: Cambridge College TARGET: New England College of Business and Finance TRANSACTION: Acquisition CONSIDERATION: Undisclosed Boston-based Cambridge College says it plans to acquire the New England College of Business and Finance (NECB), also based in Boston, which will integrate NECB’s programmes into Cambridge College’s operations.

Campus Advantage and Stark Enterprises acquire student housing COMPANY: Campus Advantage and Stark Enterprises TARGET: Campus View Place and Lyons Corner TRANSACTION: Acquisition CONSIDERATION: Undisclosed Austin, Texas-based Campus Advantage, a student housing property management, consulting and investment management company, and Stark Enterprises, a real estate developer headquartered in Cleveland, Ohio, have acquired Campus View Place and Lyons Corner, two student housing properties located near the University of Florida in Gainesville.

Canadian pension fund and L’Oréal family office acquire Galileo in €2.2bn deal COMPANY: Canada Pension Plan Investment Board and Tethys Investments TARGET: Galileo Global Education TRANSACTION: Acquisition CONSIDERATION: More than €2.2 billion The Canada Pension Plan Investment Board (CPPIB), the investment arm of Canada’s largest pension fund, has bought a 40% stake in private university operator Galileo Global Education in a deal valued at more than €2.2 billion, EducationInvestor Global exclusively revealed. Tethys Investments, a private equity fund controlled by France’s Bettencourt family, which owns cosmetics giant L’Oréal, has upped its existing stake in Galileo from 20% to 40%, one source told this publication. A long-term fund overseen by Europe’s Montagu Private Equity took the remaining 20% stake, it is understood.

Coursedog raises $4.2m COMPANY: Coursedog TRANSACTION: Fundraising CONSIDERATION: $4.2 million New York City-based Coursedog, a software start-up that offers an operating system for universities to schedule classes, professors and sections based on demand and interest, has raised funding from several investors, including First Round’s Josh Kopelman, TechCrunch has reported.

Ed tech start-up Edwin merges with voice assistant company COMPANY: Edwin and MyBuddy.ai TRANSACTION: Merger Edwin, an ed tech start-up backed by General Catalyst, Y Combinator, and Google Assistant Investments Program, among others, has merged with MyBuddy.ai, an educational voice technology company. Both companies offer help to learn English as a foreign language. The resulting company will keep the name MyBuddy.ai. and be headquartered in San Francisco.

Elsevier acquires Authess COMPANY: Elsevier TARGET: Authess TRANSACTION: Acquisition Elsevier, a Dutch publishing and analytics company specialising in scientific, technical, and medical content, and part of RELX, has acquired Authess, a Boston-based developer of a performance-based competency assessment platform that evaluates how students solve complex, openended problems that they would encounter on the job.

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Emerge Education announces new ed tech seed fund COMPANY: Emerge Education TRANSACTION: New fund CONSIDERATION: £10 million Emerge Education, a London-based investment firm focused on ed tech, has announced the first close of a new fund, Tech EU has reported.

The fund is currently capped at £10 million, with investments from Cambridge University Press, Cambridge Assessment, Nesta, Jisc, Brazilian higher education group Grupo Tiradentes, as well as US education industry executives Dan Sommer and Rob Cohen. The company stated that it expects the fund to double over the next few months. The fund is initially making £250,000 investments in 20 to 25 pre-seed and seed European companies, with the ability to increase its funding to £1 million in each company in later rounds.

GradeSlam rebrands to Paper and raises $7.5m in funding COMPANY: GradeSlam TRANSACTION: Fundraising CONSIDERATION: $7.5 million Montreal-based GradeSlam, an education company founded by McGill University graduates Philip Cutler and Roberto Cipriani, has raised funding in a round led by Reach Capital and supported by Bullpen Capital. Also participating were existing investors Birchmere Ventures, BDC Capital, Real Ventures, Google, Red House Education, Edovate Capital, and Anges Quebec.

French nursery provider to expand UK footprint with new acquisition COMPANY: Grandir TARGET: Nurture Day Nurseries TRANSACTION: Acquisition CONSIDERATION: Undisclosed French nursery operator Grandir is set to acquire Nurture Day Nurseries, a pair of London sites, in a deal that will expand its UK footprint, EducationInvestor Global exclusively revealed.

Higher Ground acquires nanny sharing platform COMPANY: Higher Ground Education TARGET: CozyKin TRANSACTION: Acquisition CONSIDERATION: Undisclosed Lake Forest, California-based Higher Ground Education, a network of schools dedicated to mainstreaming Montessori worldwide, has acquired Boston-headquartered CozyKin, which provides Montessori-inspired nanny sharing at home.

Online proctoring service raises $11.5m COMPANY: Honorlock TRANSACTION: Fundraising CONSIDERATION: $11.5 million Boca Raton, Florida-based Honorlock, an online proctoring service, has raised Series A funding led by Neil Sequeira from Silicon Valley-based Defy Partners.

HOPE Education agrees to buy INTI Education Group COMPANY: HOPE Education TARGET: INTI Education Group TRANSACTION: Acquisition CONSIDERATION: $140 million, which includes a $14 million payment to a minority equity shareholder HOPE Education Group (Hong Kong) Company has agreed to buy Laureate’s INTI Education Group, a group of higher education institutions in Malaysia. Rothschild & Co was financial advisor to Laureate Education, and DLA Piper was the company’s transaction counsel.

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FINANCE: DEALS

Brazilian course creation platform to buy Teachable COMPANY: Hotmart TARGET: Teachable TRANSACTION: Acquisition CONSIDERATION: Undisclosed Hotmart, a Belo Horizonte, Brazil-based platform which creates and sells online courses, is buying New York-based Teachable, a similar business, in a deal expected to complete in the second quarter, EdSurge has reported.

School security firm completes acquisition COMPANY: Identity Automation TARGET: Enboard TRANSACTION: Acquisition CONSIDERATION: Undisclosed Houston-based Identity Automation, provider of the RapidIdentity identity and access management platform, has acquired Easley, South Carolinabased Enboard, which offers automated user account management, single sign-on, smart account provisioning, rostering, and secure encryption solutions for the education market. Carolina Financial Securities was exclusive financial advisor to Enboard in the transaction.

IXL Learning acquires vocabulary website COMPANY: IXL Learning TARGET: Vocabulary.com TRANSACTION: Acquisition CONSIDERATION: Undisclosed San Mateo, California-based IXL Learning, a K12 personalised learning platform, has acquired vocabulary improvement website Vocabulary.com, headquartered in New York City.

Wiley expands career centre services with acquisition of Madgex COMPANY: John Wiley and Sons TARGET: Madgex TRANSACTION: Acquisition CONSIDERATION: Undisclosed Hoboken, New Jersey-based global publishing company John Wiley and Sons has acquired Madgex, a provider of advanced job board software and career centre services.

Learning Curve acquires hairdressing apprenticeship company COMPANY: Learning Curve Group TARGET: London Hairdressing Apprenticeship Academy TRANSACTION: Acquisition CONSIDERATION: Undisclosed Learning Curve Group has acquired London-based hair and beauty training provider the London Hairdressing Apprenticeship Academy and its subsidiary, London Beauty Training Academy. Learning Curve Group was supported in the deal by Burness Paull and EY, while LHAA was supported by Macintyre Hudson, SBP Law Solicitors and HW Fisher.

Learning Technologies Group to acquire Open LMS COMPANY: Learning Technologies Group TARGET: Open LMS TRANSACTION: Acquisition CONSIDERATION: $31.7 million London-headquartered Learning Technologies Group, the workplace learning and talent industry company, is acquiring Blackboard’s Open LMS platform for $31.7 million.

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Le Wagon raises $19m to build global coding bootcamp COMPANY: Le Wagon TRANSACTION: Fundraising CONSIDERATION: $19 million Paris-based start-up Le Wagon has raised its first round of funding after many years of bootstrapping, by closing a funding round a few months ago, TechCrunch has reported. Cathay Capital led the round with AfricInvest participating.

Merged EdtechX Holdings and Meten International raises $36m COMPANY: Meten International Education Group and EdtechX Holdings Acquisition Corp TRANSACTION: Fundraising CONSIDERATION: $36million EdtechX and Meten have completed the private placement of $36 million from institutional investors including Azimut, an Italian asset manager with assets under management of more than $60 billion, and Xiamen ITG Holding Group, which is engaged in range of industries across China, including education. The newly merged China-based entity will operate as Meten EdtechX Education Group. Chardan acted as financial and capital markets advisor to EdtechX. Macquarie acted as financial advisor to Meten. Graubard Miller acted as legal counsel to EdtechX, and Morgan, Lewis & Bockius and Conyers acted as legal counsels to Meten. Loeb & Loeb acted as special legal advisor to Chardan. Citigate Dewe Rogerson and Inbound Capital acted as investor relations advisors for the merged entity Meten EdtechX.

Moody’s acquires online training and certifications firm COMPANY: Moody’s Corporation TARGET: RBA International TRANSACTION: Acquisition CONSIDERATION: Undisclosed New York City-based risk assessment firm Moody’s Corporation has acquired RBA International, a London-based provider of online retail bank training and certifications. Moody’s acquired RBA from Parabellum Investments, a privately-owned international investment firm. The transaction was funded with cash on hand.

Multibhashi raises venture funding COMPANY: Multibhashi TRANSACTION: Fundraising CONSIDERATION: Undisclosed Bangalore-based language learning start-up Multibhashi has raised funding led by Inflection Point Ventures in a venture round, Express Computer has reported. Mukul Agarwal from Param Capital and Anurag Goel from Cactus Communication also participated.

Nepris raises $5m in Series A COMPANY: Nepris TRANSACTION: Fundraising CONSIDERATION: $5 million Plano, Texas-based Nepris, which provides an online tool to connect classrooms and workplaces through live and recorded video streams with a professional, has raised Series A funding EdSurge has reported. Virtual school operator K12 led the round. The publicly traded company is one of Nepris’s top customers, implementing the platform at all of its Destination Career Academies. The Michael and Susan Dell Foundation, Next Wave Impact Fund, Sustain VC, Strada Education and Bonsal Capital also participated.

Former independent school to become police-training centre COMPANY: Norfolk Constabulary TARGET: Hethersett Old Hall School TRANSACTION: Acquisition CONSIDERATION: £3.35 million Norfolk Constabulary has purchased Hethersett Old Hall School, which closed in August last year, for a training facility. The deal was agreed by the development team at Savills Norwich after they were instructed by insolvency experts McTear Williams and Wood. The project has been funded through capital investment, with no additional burden on UK taxpayers.

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FINANCE: DEALS

OneSmart to buy Yimi Online Tutoring COMPANY: OneSmart International Education Group TARGET: Certain technologies and business of Yimi Education Technology TRANSACTION: Acquisition CONSIDERATION: Undisclosed Shanghai-based after-school K12 education services provider OneSmart International Education Group has announced that it is acquiring certain technologies and business of Yimi Education Technology, Seeking Alpha has reported.

Palladium acquires alternative student transportation company COMPANY: Palladium Equity Partners TARGET: ALC Schools TRANSACTION: Acquisition CONSIDERATION: Undisclosed Alternative student transportation company ALC Schools has been acquired by an affiliate of Palladium Equity Partners, a private equity firm based in New York City. Varagon Capital Partners announced it is serving as administrative agent, joint lead arranger and joint bookrunner on a senior secured credit facility to support the acquisition.

School-home communication firms combine COMPANY: ParentSquare TARGET: Signal Kit TRANSACTION: Acquisition CONSIDERATION: Undisclosed Santa Barbara, California-based ParentSquare has acquired Signal Kit, headquartered in Overland Park, Kansas, in a cash and equity deal. Both are providers of school-home communication tools for K12 schools and districts.

Poppy & Jack’s acquires Nottingham setting COMPANY: Poppy & Jack’s Group TARGET: West Bridgford Day Nursery TRANSACTION: Acquisition CONSIDERATION: Around £850,000 Poppy & Jack’s Group, an expanding nursery operator based in the Northwest of England has purchased West Bridgford Day Nursery, located in an affluent suburb of Nottingham, which provides childcare for up to 40 children. Specialist business property advisor, Christie & Co, advised on the sale.

Online tutor service raises $10m COMPANY: Preply TRANSACTION: Fundraising CONSIDERATION: $10 million Brighton, Massachusetts-headquartered online learning platform Preply, which originated in Ukraine, has raised funding, The PIE News has reported. The round was led by London-based Hoxton Ventures, with participation from European investors Point Nine Capital, All Iron Ventures, The Family, EduCapital, and Diligent Capital. Individual angel investors also participated including Arthur Kosten of Booking.com; Gary Swart, former chief executive of Upwork; David Helgason, founder of Unity technologies; and Daniel Hoffer, founder of Couchsurfing.

Roblox raises $150m in Series G funding COMPANY: Roblox TRANSACTION: Fundraising CONSIDERATION: $150 million Online gaming platform Roblox has raised Series G funding, led by Andreessen Horowitz’s late-stage venture fund, Tech Crunch has reported.

Roblox has created Roblox Education to offer a free curriculum to educators, international summer coding camps and a game development platform geared at children. The company is also opening a tender offer for up to $350 million of common and preferred shares. Others participating in the funding include new investors Temasek and Tencent Holdings, as well as existing investors Altos Ventures, Meritech Capital, and Tiger Global Management.

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FINANCE: DEALS

Round Hill Capital and NBK Capital acquire student accommodation COMPANY: Round Hill Capital and NBK Capital TARGET: Student accommodation development TRANSACTION: Acquisition CONSIDERATION: Gross development value of €85 million Round Hill Capital, a real estate investment, development and asset management firm, has announced that funds advised by Round Hill Capital and NBK Capital have acquired a 368-bed student accommodation development in The Liberties area of Dublin. The site was purchased from Summix, an urban mixed-use regeneration project firm.

Round Hill Capital and NBK Capital acquire student housing COMPANY: Round Hill and NBK Capital TARGET: Site for student accommodation TRANSACTION: Acquisition CONSIDERATION: Undisclosed Round Hill Capital, a real estate investment, development and asset management firm, has announced that funds advised by Round Hill and NBK Capital have acquired a one-acre site with planning permission in Cork, Ireland, for a mixed-use project including 145 purpose-built student accommodation beds and facilities.

Education robot maker acquires artificial intelligence engine COMPANY: Roybi TARGET: KidSense TRANSACTION: Acquisition CONSIDERATION: Undisclosed Mountain View, California-based Roybi, which produces a pill-shaped robot which teaches language and maths skills to young children, has acquired the KidSense artificial intelligence engine developed by Kadho, based in Irvine, California, Ed Surge has reported.

Prestariang to dispose of education unit COMPANY: Serba Dinamik Group TARGET: Prestariang TRANSACTION: Acquisition CONSIDERATION: 2.5 million ringgit (£467,000) Prestariang, which provides information and communication technology training and certification services in Malaysia, is selling its boutique university to Serba Dinamik Group The Edge Markets has reported. University Malaysia of Computer Science and Engineering is currently owned and operated by Prestariang’s unit Prestariang Education.

On-demand tutoring app raises $35m COMPANY: Snapask TRANSACTION: Fundraising CONSIDERATION: $35 million Hong Kong-based on-demand tutoring app Snapask has raised Series B funding in a round led by Asia Partners and Intervest, Tech Crunch has reported.

Snapplify acquires Onnie Media/Teacha!

COMPANY: Snapplify TARGET: Onnie Media/Teacha!

TRANSACTION: Acquisition CONSIDERATION: Undisclosed Cape Town-based ed tech start-up Snapplify has acquired Onnie Media/Teacha! – an educator media hub for South African teachers, also headquartered in Cape Town.

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Recognising excellence

in Scotland The 7th Scottish NMT Nursery Awards will be held on Friday 4th September 2020 at the Hilton Glasgow, Scotland MAIN SPONSOR Following the huge success of the sixth Scottish NMT Nursery Awards last year, NMT Magazine are delighted to announce that the seventh Scottish NMT Nursery Awards are now open!

Exciting news – the Scottish NMT Nursery Awards are returning in 2020 for a seventh year and we are thrilled to be supporting this fantastic event as Main Sponsor!

Morton Michel is known as the UK’s leading childcare insurance specialist. For over 25 years we have provided specialist cover for nurseries and are proud to protect the assets and interests of almost 4,000 nurseries nationwide.

Our nursery insurance package includes a range of additional benefits such as FREE Early Years training from award-winning flick learning, access to our FREE Early Years Advisory Service provided by Croner-i, a FREE counselling helpline and lots of discounts for you, your staff and your business as part of our exclusive ChildCare Club!

The Scottish NMT Nursery Awards are designed to discover and reward the very best people in the Scottish nursery sector. Here at NMT we are delighted to announce that our Main Sponsor will be Morton Michel.

To enter, complete the online Entry Form at:

www.nmt-magazine.co.uk/scottishawards or email: events@investorpublishing.co.uk

#ScottishNMTAwards

@NurseryManagementToday

@NMTMagazine

2020 CATEGORIES: ■ NURSERY TRAINING & DEVELOPMENT AWARD ■ INDIVIDUAL NURSERY AWARD ■ NURSERY INDOOR LEARNING ENVIRONMENT AWARD ■ NURSERY TEAM AWARD ■ FOREST OR BEACH SCHOOL / KINDERGARTEN AWARD ■ NURSERY MANAGER AWARD

We are really excited to be celebrating excellence in the Scottish early years sector this September and look forward to meeting many of you soon!

■ NURSERY AREA MANAGER / OPERATIONS MANAGER AWARD

Sue Lee Managing Director

■ NURSERY GROUP AWARD

■ NURSERY OUTDOOR LEARNING ENVIRONMENT AWARD ■ NURSERY NURSE / CHILDCARE WORKER AWARD ■ NURSERY ROOM LEADER AWARD ■ NURSERY PERSONALITY OF YEAR AWARD

CATEGORY SPONSORS

For sponsorship opportunities please contact Caroline Bowern; caroline.bowern@investorpublishing.co.uk

CLOSING DATE FOR ENTRIES: FRIDAY 15th MAY 2020

FINANCE: DEALS

Education technology fund closes at €40m COMPANY: Sparkmind TRANSACTION: New fund CONSIDERATION: €40 million Helsinki-based education technology investment firm Sparkmind has announced the first close of its venture fund, totalling €40 million, EdSurge has reported. The fund’s biggest financial backers are Tesi, an investment company owned by the Finnish government, and KRR III, a separate fund that Tesi helped establish. Other investors include OP Banking Group, Elo Mutual Pension Insurance Company, the University of Jyväskylä and the City of Espoo.

Storal Learning acquires 20th setting COMPANY: Storal Learning TARGET: Edgbaston Nursery School TRANSACTION: Acquisition CONSIDERATION: Undisclosed Expanding nursery group Storal Learning has establishes its 20th early years setting with the acquisition of Edgbaston Nursery School in Birmingham. The nursery is an imposing property established by Steve and Carole Lee, who are retiring. The sale was facilitated by commercial real estate firm Redwoods Dowling Kerr.

Talespin raises $15m in Series B funding COMPANY: Talespin TRANSACTION: Fundraising CONSIDERATION: $15 million Los Angeles-based Talespin, which uses virtual reality to train employees has raised Series B funding, in a round led by Cornerstone OnDemand, a provider of cloud-based learning, talent management and talent experience software. HTC also joined the round as a new investor, with participation from existing investors, including Farmers Insurance Exchange.

Old Station Nurseries acquires Essex setting COMPANY: The Old Station Nurseries TARGET: Small Friends Day Nursery TRANSACTION: Acquisition CONSIDERATION: Undisclosed The Old Station Nurseries, which is owned by France’s La Maison Bleue, has acquired Small Friends Day Nursery, located in Leigh-on-sea, Essex.

Specialist business property advisor Christie & Co advised on the sale.

The Riverside Company acquires Red Nucleus COMPANY: The Riverside Company TARGET: Red Nucleus Enterprises TRANSACTION: Acquisition CONSIDERATION: Undisclosed Global private equity firm The Riverside Company has acquired Yardley, Pennsylvania-based Red Nucleus Enterprises from Renovus Capital Partners, a private equity firm focused on education and human capital. Red offers a suite of digital learning and compliance solutions to the global life sciences industry. Renovus has retained a minority equity interest in Red Nucleus. DLA Piper was legal counsel and Cherry Bekaert was financial advisors to Red Nucleus.

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FINANCE: DEALS

Thoma Bravo completes acquisition of Instructure COMPANY: Thoma Bravo TARGET: Instructure TRANSACTION: Acquisition CONSIDERATION: Approximately $2 billion Thoma Bravo, a private equity firm focused on the software and technology-enabled services sectors, has acquired Instructure in an all-cash transaction. The deal comes after Thoma Bravo upped its offer following an earlier rejected bid by the Instructure board. Thoma Bravo is based in Chicago; Instructure is headquartered in Salt Lake City. Kirkland & Ellis was the legal advisor to Thoma Bravo. JP Morgan Securities was exclusive financial advisor to Instructure, and Cooley was its legal advisor.

Unacademy raises $110m in Series E funding COMPANY: Unacademy TRANSACTION: Fundraising CONSIDERATION: $110 million Bengaluru-based learning platform provider Unacademy has raised Series E funding round, Finsmes has reported. Backers included new investors Facebook and General Atlantic, along with Sequoia India, Nexus Venture Partners, Steadview Capital, and Blume Ventures. Kalyan Krishnamurthy, chief executive of Flipkart and Sujeet Kumar, co-founder of Udaan, also participated, Unacademy also provided exits to some of its angel investors.

Unacademy acquires Kreatryx COMPANY: Unacademy TARGET: Kreatryx TRANSACTION: Acquisition CONSIDERATION: Undisclosed Bengaluru-based ed tech start-up Unacademy has acquired Delhi-based ed tech start-up Kreatryx in a cash and stock deal, Inc 42 has reported.

Turkey’s Univa enters UK student accommodation market COMPANY: Univa TARGET: Opto Living TRANSACTION: Investment CONSIDERATION: £10 million Turkish purpose-built student accommodation company Univa has announced an investment in UK student property and facility management company Opto Living, forming the Univa & Opto Cardiff student housing project.

Univa makes its first investment COMPANY: Univa TARGET: 140 luxury student studio suites TRANSACTION: Acquisition CONSIDERATION: Undisclosed Univa makes its first investment with the acquisition of 140 luxury student studio suites in Cardiff city centre. Opto Property Group will develop and act as the main contractor, while Opto Living will be the operator and facilities manager of the new site under the name of Univa & Opto Cardiff.

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FINANCE: DEALS

Up Education acquires teacher-training provider COMPANY: UP Education TARGET: New Zealand Tertiary College TRANSACTION: Acquisition CONSIDERATION: Undisclosed UP Education, an independent tertiary education provider in New Zealand has acquired New Zealand Tertiary College, the country’s largest provider of early childhood education teacher education.

Volaris Group acquires MUSAC COMPANY: Volaris Group TARGET: MUSAC TRANSACTION: Acquisition CONSIDERATION: Undisclosed Mississauga, Ontario-based software company Volaris Group has acquired MUSAC, a provider of school and library management solutions for New Zealand schools.

Yum! Brands invests in leadership development programme COMPANY: Yum! Brands TARGET: Heartstyles TRANSACTION: Acquisition CONSIDERATION: Undisclosed US conglomerate Yum! Brands has acquired London-based Heartstyles, a leadership development programme.

EducationInvestor Global

Deals database The perfect tool for researching your competitors, the best advisors, potential employers and much more.

Search by keyword, deal type, date, consideration or valuation at educationinvestor.co.uk Access the deals database by becoming a subscriber: ipevents.net/subscriptions/educationinvestor-global-subscriptions

EducationInvestor Global • April/May 2020

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FINANCE: RESULTS

company results 21st Century Education 21st Century Education is a large private education services provider based in China.

PERIOD COVERED: Full year 2019 PROFIT: REVENUE:

¥82.8 million (£9.4 million)

+19.2% on 2018

¥234.2 million

+16% on 2018

HIGHLIGHTS: • Revenue from vocational education was ¥141million.

• The group recorded 32,228 student enrolments in 2019, representing an increase of 5.4%, compared with the same period of 2018.

The company’s board issued a statement saying: “As China’s economy improved steadily in 2019, the government emphasised more on enhancing the development of the education industry as well as the education system. During the year, the group seized the opportunity to expand its business coverage stably, improve the teaching quality and enhance the service quality with technology.”

Afya Nova Lima-based Afya is a Brazilian medical education group.

PERIOD COVERED: Full year 2019 ADJUSTED NET INCOME:

236.9 million reais (£37.5 million)

+137.4%

2018: 99.8 million reais

REVENUE:

750.6 million reais

+124.8%

2018: 333.9 million reais

HIGHLIGHTS: • The company also reported results for the fourth quarter of 2019. Its adjusted net income for the period was 71.85 million reais, up from 28.5 million reais reported for the fourth quarter of 2018 – a 151.7% increase.

• Revenue for the quarter was 220.8 million, up from 106.2 million reported for Q4 2018 – a 107.9% increase.

Afya issued a statement saying: “We are very pleased with Afya’s performance throughout its first year as a public company. In 2019, we delivered strong top-line growth, profitability and cash generation towards the higher end of 2H19 guidance range. We have made significant progress with our strategic objectives, creating the foundations for Afya’s highly predictable and sustainable growth. Moreover, synergies from our first round of acquisitions are starting to materialise, supporting an attractive 1H20, as indicated in our new guidance.”

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FINANCE: RESULTS

American Public Education The Charles Town, West Virginia-based company operates through two segments: American Public Education Inc (APEI) and Hondros College Nursing Programs. APEI primarily includes operations of American Military University and American Public University. Together, they are referred to as American Public University System (APUS).

PERIOD COVERED: Full year 2019 NET INCOME: REVENUE:

$10 million

–60.9%

2018: $25.6 million

$286.3 million

–3.8%

2018: $297.7 million

HIGHLIGHTS: • The company also announced its results for the fourth quarter of 2019. Its net income for the period was $5.7 million, down from net income of $9.1 million reported for the fourth quarter of 2018.

• Revenue for the quarter was $74.4 million, down from $76.9 million reported for Q4 2018.

American Public Education chief executive officer Angela Selden: “This year, we will begin implementing a fresh new marketing approach intended to maximise our potential to reach a wider audience of learners who will discover that our affordability is matched – or exceeded – only by the ability of APUS to provide a flexible, relevant, high-value education from the moment they enrol and throughout their lives.”

ATA Creativity Global ATA Creativity Global is a Beijing-based educational experiences and services company.

PERIOD COVERED: Full year 2019 NET LOSS: NET REVENUE:

¥134 million (£15.3 million)

L

2018: ¥68.1 million

¥97.8 million

+7,204%

2018: ¥1.3 million

HIGHLIGHTS: • The company also reported results for the fourth quarter of 2019. Its net loss for the period was ¥72.3 million, compared to a net loss of ¥25.9 million reported for the fourth quarter of 2018. Revenue for the period was ¥54.1 million, compared to ¥189,000 reported for Q4 2018.

ATA Creativity Global chairman and chief executive Kevin Ma: “2019 was a monumental year for our company as we closed the Huanqiuyimeng acquisition in the second half of the year, marking the beginning of ACG’s new strategic direction. The company’s new name, ATA Creativity Global, and ticker symbol ‘AACG’ represent this next phase of our evolution. In reviewing our results for fourth quarter 2019, it is important to note that these numbers incorporate the full quarter’s results from Huanqiuyimeng, while third-quarter 2019 results incorporated only about two months of results from Huanqiuyimeng.”

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FINANCE: RESULTS

Barnes & Noble Basking Ridge, New Jersey-based Barnes & Noble Education provides educational products and services for higher education and K12.

PERIOD COVERED: Third quarter of fiscal year 2020, ending 25 January, 2020 NET LOSS/INCOME: TOTAL SALES FIGURE:

($1.7 million)

L

2019: $769,000

$502.3 million

–8.3%

2019:$548 million

HIGHLIGHTS: • The company also reported results for the first nine months of its fiscal year. Net income was $2.1 million, down from $21.8 million reported for the first nine months of fiscal year 2019.

• The total sales figure for the nine-month period was $1.59 billion, down from $1.7 billion reported for the first nine months of fiscal year 2019.

Barnes & Noble Education chairmen and chief executive Michael P Huseby: “Our third-quarter results continue to reflect the higher education industry’s rapid evolution to digital courseware solutions. While this pivot presents many challenges, we are focused on the significant opportunities such profound change gives us, as our campus partners actively rely on us to navigate this rapidly changing landscape.”

Bluedrop Performance Learning Bluedrop Performance Learning is an e-learning company based in St John’s, Newfoundland and Labrador, Canada.

PERIOD COVERED: Three months ending 31 December, 2019 AFTER-TAX PROFIT/LOSS: REVENUE:

C$800,000 [£465,000]

P

2018: (C$1.1 million)

C$6.1 million

+58%

2018: C$3.9 million

Bluedrop founder and chief executive Emad Rizkalla: “It was a good quarter for both the training and simulation and the learning networks business units. Both business units continue to deliver on existing and new contracts based on our own intellectual property.”

G8 Education G8 Education is an Australian childcare provider headquartered in Varsity Lakes, Queensland.

PERIOD COVERED: Full year 2019 UNDERLYING EARNINGS BEFORE INTEREST AND TAXES::

A$132.5 million [£67.8 million]

–2.8%

2018: A$136.3 million

TOTAL REVENUE:

A$920.1 million

+7.2%

2018: A$858.2 million

HIGHLIGHTS: • Successful divestment of 25 centres in Western Australia, resulting in a meaningful improvement in the quality and occupancy of the group’s portfolio.

• Full-time turnaround team largely in place focused on centre turnaround opportunities and driving greenfield performance, with activities targeted for 50 centres in Q1.

• Record results for centre manager turnover, centre quality and team and child safety.

G8 managing director Gary Carroll: “The group’s 2019 full-year results reflect solid progress on operational objectives and validation of our growth strategy amid challenging industry conditions. Pleasingly, the group’s investments in quality and capability contributed to strong like-for-like occupancy growth, which flowed through to solid like-for-like EBIT growth.”

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EducationInvestor Global • April/May 2020

FINANCE: RESULTS

Graham Holdings Arlington, Virginia-based Graham Holdings is a diversified conglomerate that owns education services company Kaplan.

PERIOD COVERED: Full year 2019 NET INCOME:

$327.9 million

+ 21%

2018: $271.4 million

REVENUE:

$2.93 billion

+9%

2018: $2.7 billion

EDUCATION DIVISION INCOME:

$48.1 million

2018: £97.1 million

EDUCATION DIVISION REVENUE:

$1.45 billion

2018: $1.45 billion

HIGHLIGHTS: • Graham Holdings also reported its results for the fourth quarter 2019. Net income for the quarter was $146 million, compared to $56.7 million reported for the fourth quarter of 2018. Revenue for the period was $763.5 million, up 11% on the $689.1 million reported for fourth quarter of 2018.

• Fourth-quarter net income for the company’s education division was $3.3 million, down from the $14.6 million reported for Q4 2018.

Revenue for the quarter was $354.2 million, up 2% on the $346.9 million reported for Q4 2018.

Hailiang Education Group Hailiang Education Group is an education and management services provider to primary, middle, and high schools in China.

PERIOD COVERED: First six months of fiscal year 2020, ending 31 December, 2019 NET PROFIT:

¥197.6 million (£22.8 million)

+52.5%

2019: ¥129.6 million

REVENUE:

¥736.7 million

+12.9%

2019: ¥652.7 million

HIGHLIGHTS: • As of 31 December, 2019, the scale of the company’s school network was expanded to 38 schools, 10 of which were affiliated schools that Hailing sponsored and 28 of which were managed schools that Hailing provided with education and management services.

• The aggregate number of enrolments in both affiliated and managed schools was 67,821 students – an increase of 10.9% for the same period last year.

Hailiang Education chairman and chief executive Ming Wang: “The increase [in profit] was primarily due to the continued growth of tuition of our affiliated schools and the expansion of our study trips and overseas study consulting services. Furthermore, our earning capability continued to grow. For the first six months of fiscal year 2020, our gross profit margin was 32.3% and net profit margin was 26.8%, increased from 30.3% and 19.9%, respectively, compared to the same period last year.”

EducationInvestor Global • April/May 2020

57

FINANCE: RESULTS

Houghton Mifflin Harcourt Boston-based Houghton Mifflin Harcourt is a global publishing and learning firm.

PERIOD COVERED: Full year 2019 NET LOSS: NET SALES:

($213.8 million)

L

2018: ($94.2 million)

$1.39 billion

+5.2%

2018: $1.32 billion

HIGHLIGHTS: • The company also reported results for the fourth quarter of 2019. Its net loss for the period was $125.1 million, compared to a net loss of $55.9 million reported for the fourth quarter of 2018.

• The net sales figure for the period was $241.5 million, down from $249 million reported for the fourth quarter of 2018.

Houghton Mifflin Harcourt president and chief executive Jack Lynch: “This was a very strong year for execution and growth at HMH, and our financial results indicate the progress we are making in transforming our business. We raised our billings guidance twice reflecting the strength we saw during the year. As we look forward to 2020, we will continue to focus on our strategy to expand our market leadership, create greater impact on student achievement and deliver greater returns for our shareholders.”

John Wiley & Sons Hoboken, New Jersey-based John Wiley & Sons is a global publishing company.

PERIOD COVERED: Third quarter of fiscal year 2020, ending 31 January, 2020 NET INCOME: REVENUE:

$34.9 million

–49.2%

2019: $68.8 million

$449.4 million

–1.4%

2019: $455.7 million

HIGHLIGHTS: • The company also reported results for the first nine months of its 2020 fiscal year ending 31 January, 2020. Its net income for the period was $105 million, down from $138.1 million reported for the first nine months of its 2019 fiscal year.

• Revenue for the nine-month period was $1.31 billion, compared to $1.32 billion reported for the first nine months of fiscal year 2019.

John Wiley & Sons president and chief executive Brian Napack: “We made significant progress throughout Wiley this quarter, securing a ground-breaking research publishing partnership with Germany’s DEAL consortium, growing Open Access publishing by 48%, closing and integrating our Learning House acquisition, signing eight strategic university partnerships, and ramping up our cross-Wiley optimisation initiative to improve our cost structure, agility, and effectiveness. Growth was evident across the portfolio except for our traditional book businesses, which weighed heavily on results.”

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EducationInvestor Global • April/May 2020

FINANCE: RESULTS

Laix Shanghai-based Laix is an artificial intelligence company providing online English-learning services in China.

PERIOD COVERED: Full year 2019 NET LOSS: NET REVENUE:

(¥574.8 million) [(£65.6 million)]

L

2018: (¥516.1 million)

¥1.02 billion

+60.6%

2018: ¥637.2 million

HIGHLIGHTS: • The company also announced results for the fourth quarter of 2019. Its net loss for the period was ¥205.6 million, compared to a net loss of ¥163.4 million for Q4 2018.

• Revenue for the quarter was ¥231.4 million, up from ¥224.5 million reported for Q4 2018.

Laix chairman and chief executive Dr Yi Wang: “We are all very concerned about the Covid-19 outbreak in China. As part of our overall existing corporate social responsibility mandate, we have initiated efforts as a company to help those who have been impacted. At the end of January, we launched a nationwide initiative to offer complimentary courses as a way to support this fight and help those in the most impacted regions.”

Perdoceo Schaumburg, Illinois for-profit post-secondary higher education provider Perdoceo was formerly known as Career Education Corporation.

PERIOD COVERED: First quarter 2020 ending 31 March NET INCOME: REVENUE:

$27.5 million

+95%

2019: $14.1 million

$158.5 million

+8.9%

2019: $145.5 million

Perdoceo president and chief executive Todd Nelson said: “We are excited to continue the journey of educating students under our new name, Perdoceo, which in Latin means ‘to teach, inform or instruct thoroughly’. Looking ahead, we remain committed to the objective of sustainable and responsible growth, and look forward to closing the Trident acquisition and its effective integration into our operations.”

Puxin Puxin is a Beijing-based after-school education company.

PERIOD COVERED: Full year 2019 NET LOSS: NET REVENUE:

(¥518.5 million) [£57.8 million]

L

(2018: ¥833.4 million)

¥3.1 billion

+39.3%

2018: ¥2.23 billion

HIGHLIGHTS: • The company also reported results for the fourth quarter of 2019. Its net loss for the period was ¥108.8 million, compared to a net loss of ¥239.7 million reported for Q4 2018.

• Revenue for the quarter was ¥859.3 million, up from ¥531.4 million reported for the fourth quarter of 2018.

Puxin chairman and chief executive Yunlong Sha: “Following the online-merge-offline trend in after-school tutoring market, Puxin has put forth significant efforts in both online and offline markets.

In the offline space, we have not only re-engaged mergers and acquisitions activities, but we have also leveraged Puxin Business System’s capabilities to maintain the high organic growth rate for our K12 business.”

EducationInvestor Global • April/May 2020

59

FINANCE: RESULTS

Rise Education Cayman Beijing-based Rise Education Cayman is a junior English-language training provider in China.

PERIOD COVERED: Full year 2019 NET INCOME: REVENUE:

¥144.6 million [£16.4 million]

+1.5%

2018: ¥142.4 million

¥1.53 billion

+20.25%

2018: ¥1.27 billion

HIGHLIGHTS: • The company also reported results for the fourth quarter of 2019. Net income for the period was ¥49.4 million, up from ¥34.4 million reported for Q4 2018.

• Revenue for the period was ¥416.2 million, up from ¥354.2 million reported for Q4 2018.

Rise Education Cayman chairwoman and chief executive Lihong Wang: “While we generated solid financial results for the year, we also experienced higher refund rates and lower-than-expected rollover rates, reflecting the impact of the three-month tuition collection policy implemented in certain cities. As a result, students in class and new students enrolled for Rise regular courses fell short of their target for the year despite a strong pipeline of prospective students.”

RYB Education Beijing-based RYB Education is an early childhood education service provider.

PERIOD COVERED: Full year 2019 NET LOSS: NET REVENUE:

($2.2 million)

L

2018: ($1.7 million)

$182.3 million

+19.4%

2018: $156.5 million

HIGHLIGHTS: • Revenue for the quarter was $50.7 million, up from $45 million reported for fourth quarter of 2018.

RYB co-founder and chief executive Yanlai Shi: “Looking back at the fourth quarter of 2019, in the face of many challenges in the overall market, we continued to focus on growing our core businesses whilst improving the educational quality of our offerings and services, increasing operational efficiencies, and achieving higher levels of customer satisfaction. We also further advanced the online-merge-offline process across our facilities.”

60

EducationInvestor Global • April/May 2020

FINANCE: RESULTS

Strategic Education Working adult education company Strategic Education Inc (SEI) owns for-profit online Strayer University and Capella University.

PERIOD COVERED: Full year 2019 CONSOLIDATED INCOME/LOSS:

$110.5 million

P

2018: ($22.7 million)

REVENUE:

$997.1 million

+57.2%

2018: $634.2 million

HIGHLIGHTS: • The company also announced results for the fourth quarter of 2019, reporting consolidated income of $37.2 million, compared to consolidated income of $18.9 million reported for the fourth quarter of 2018.

• Revenue for period was $263.8 million, up from $242.1 million reported for the fourth quarter of 2018.

SEI chief executive Karl McDonnell: “We are very pleased with the organisation’s execution to deliver record results in 2019, our first full year as a combined company since closing the merger with Capella Education Company. This strong performance provides us with a solid foundation and momentum to drive growth in 2020 as we remain focused on delivering academic success and long-term economic mobility for our students and alumni.”

Sunlands Technology Group Beijing-based Sunlands Online Education is an online post-secondary and professional education company.

PERIOD COVERED: Full year 2019 NET LOSS: NET REVENUE:

¥395.2 million (£44.9 million)

L

¥2.19 billion

2018: ¥926.95 million 2018: ¥ 1.97 billion

HIGHLIGHTS: • The company also reported its results for the fourth quarter of 2019. Its net loss for the period was ¥139.5 million, compared to a net loss of ¥183.7 million reported for Q4 2018.

• Revenue for the fourth quarter was ¥549.7 million, down from ¥568.8 million reported for Q4 2018.

Sunlands Technology Group chief executive Tongbo Liu: “In the fourth quarter of 2019, we continued to focus on our multi-pronged strategy for student acquisition and retention. Our efforts centred around the further development and differentiation of our products and services through the application of big data analytics and AI technology.”

Think Childcare Drummoyne, New South Wales-based Think Childcare is a childcare day centre operator.

PERIOD COVERED: Full year 2019 PROFIT AFTER TAX:

A$3.4 million (£1.7 million)

–32%

2018: A$5 million

SERVICE REVENUE:

A$110.3 million

+36.3%

2018: A$80.9 million

Chairman Mark Kerr and managing director Mathew Edwards issued a joint statement: “Think Childcare Group has outperformed our market guidance and has achieved earnings before income tax, amortisation and depreciation EBITDA (underlying) of A$14.2 million, a 33% increase on prior comparison period (pcp) On a like-for-like basis and excluding the impact of the stapling proposal, Think Childcare Limited (Operator) has achieved $14.8 million against a guidance range of A$13.8 and A$14.8 million. The underlying net profit after tax was A$4.5 million. On a like-for-like basis NPAT (underlying) was $5.8 million, representing a 16 % increase on pcp.”

EducationInvestor Global • April/May 2020

61

EXECUTIVE MOVES

executive moves Adtalem Higher education provider Adtalem Global Education has announced that its next group president, financial services will be Stephen Beard, who is replacing Mehul Patel who is resigning his post at the end of the month to pursue another opportunity outside the education industry.

Beard joined the organisation in 2018 as senior vice-president, general counsel and corporate secretary, before taking on the role of chief operating officer last year. He was previously executive vice-president, chief administrative officer and general counsel of Heidrick & Struggles International, where he oversaw a variety of enterprise-level functions including strategy and corporate development and directed global legal operations for the company.

In addition, Chaka Patterson is being promoted to Adtalem’s general counsel and corporate secretary. Patterson joined the organisation in 2018 as vice-president, deputy general counsel. He previously held various leadership positions in the public and private sector, including chief of the Civil Actions Bureau in the Cook County State’s Attorney’s Office, partner at Jones Day, and vice-president and treasurer of Exelon Corporation.

Boxlight Boxlight Corporation, a provider of interactive technology solutions for the global education market, has appointed Michael Pope as chairman and chief executive.

62

The Lawrenceville, Georgia company’s previous chairman and chief executive, Harold Bevis, has accepted a position with another organisation and has stepped down as an officer and director.

Pope has been Boxlight’s president since 2015 and has navigated the company through seven acquisitions from 2016 to 2019, and a Nasdaq Stock Exchange listing in 2017. He has significant experience with capital markets, operations, business development, corporate strategy, accounting and corporate finance.

He was previously managing director at Vert Capital, a private equity and business advisory firm, and its affiliates from 2011 to 2016, managing portfolio holdings in education, consumer products, technology and digital media.

From 2008 to 2011, he was chief financial officer and chief operating officer for the Taylor Family in Salt Lake City, managing family investment holdings in the consumer products, professional services, real estate and education sectors. He has an active CPA licence.

CeriFi CeriFi, a provider of education to the financial services sector, has appointed Matthew Given as chief executive, based in Atlanta.

Given will lead CeriFi’s portfolio of training and certification companies, including Dalton Education, Money Education, Keir Financial Education and PassPerfect, and the Association of Certified Financial Crime Specialists. The

companies collectively cater to financial planning, insurance and securities professionals and organisations.

Given has more than 20 years’ experience in professional education and technology roles, initially as a teacher before moving into management and senior management roles. He has spent the past 10 years in senior positions within education technology businesses. Most recently he was the president and chief executive of a 500-employee education technology business that he transitioned from a founder-led consumer publishing and credit recovery company to a unified software provider. His experience spans the institutional and consumer K12 and higher education markets, as well as the professional development and certification sector.

CeriFi is a Leeds Equity Partners portfolio company.

Coursera Online course provider Coursera has appointed Dr Betty Vandenbosch as its chief content officer, effective 13 April.

Vandenbosch replaces Dil Sidhu who has decided to return to the UK to be closer to his family.

Vandenbosch has more than 25 years’ academic leadership, research, and teaching experience. She was previously chancellor of Purdue University Global, an institution resulting from Purdue University’s 2018 acquisition of Kaplan University, where she oversaw academics

EducationInvestor Global • April/May 2020

EXECUTIVE MOVES

Michael Pope, Boxlight

for nearly 30,000 students, most of whom earned their degrees online.

Before that, Vandenbosch held a number of leadership positions at Kaplan University and was associate dean and associate professor at the Weatherhead School of Management at Case Western Reserve University.

Escoffier Auguste Escoffier School of Culinary Arts, an online and campus-based culinary training and education company, has appointed Jamie Holcomb as vicepresident of instructional design and innovation for Escoffier and Triumph Higher Education Group.

Holcomb previously had a four-year tenure as associate dean of faculty, education and firstyear experience at Southern New Hampshire University. Before that, she held faculty positions at Southern New Hampshire University, Viterbo University, Ocean County College, Park University and Walsh University. She is currently pursuing a doctorate in educational leadership at Liberty University. In addition, Holcomb received a master of music degree in music education from Michigan State University and a bachelor of music in music education and a minor in secondary education from Kent State University.

Examity Anti-cheating solutions company Examity has appointed Jim Holm as its new chief executive.

Examity founder and chief executive Michael London, a Boston-based entrepreneur, has been appointed chairman of the company.

Holm has almost two decades of experience leading high-growth education and technology companies. He most previously chief executive

EducationInvestor Global • April/May 2020

Dr Betty Vandenbosch, Coursera

of Performance Assessment Network (now PSI Online), which delivers 15 million tests a year to help Fortune 500 employers assess workplace readiness. Before that, he held senior executive roles at Pearson and Certiport. He was also a founding chief executive of Bloomberg Institute, and co-founder of College Coach and the founder of EdAssist, both now owned by Bright Horizons.

Facts Facts, a division of Nelnet has appointed Scott Spethman as president, reporting to DeeAnn Wenger, president of Nelnet Business Solutions.

Lincoln, Nebraska-based Facts offers tuition management, payment administration and processing, financial needs assessment, online application and enrolment, online payment forms, development and advancement tools, student administration software, and a learning management system.

Spethman has 30 years’ experience in the education industry. He initially joined Nelnet in 1998 and has spent the past seven years leading the national sales efforts for Facts and Nelnet Campus Commerce.

Nelnet is a conglomerate that deals in the administration and repayment of student loans and education financial services.

OneSmart International Education Group K12 education company OneSmart International Education Group has appointed Tuanwei Shi as chief technology officer, responsible for overseeing operations at OneSmart’s research and technology centre, reporting to Steve Zhang, chairman and chief executive.

Jamie Holcomb, Escoffier

Shi has experience leading research and development initiatives for various online services and products in the online entertainment, e-commerce, and education sectors. He has worked in several senior roles across internet companies, including Baidu, Bilibili and LAIX. The Shanghai-based company has also appointed Jinshu Ke as chief education officer, reporting to Zhang. Ke has been senior vicepresident of OneSmart since August 2017. From 1999 to 2017 he worked as a customs official in Fujian Province and as a customs attorney. Ke was a middle school teacher from 1992 to 1996.

The company added that Min Zhang has resigned as an independent director and Mason Xu has been appointed in her place. Xu will serve as a member of the audit committee, compensation committee and nominating and corporate governance committee of the board and will be the chairperson of the audit committee.

Xu is the founding partner of Heyi Capital and founder of Lightworks and DNA Pictures.

Before that, he was group vice-president and chief financial officer of Bona Film Group 2010 to 2012. Prior to that he was executive vicepresident and chief financial officer of China Digital TV Holding Co from 2006 to 2010.

Relias Bertelsmann subsidiary Relias, which provides online training for senior care, health and human services, has appointed Kay Krafft as chief executive, starting 1 April, in addition to his responsibility as chief executive of the Bertelsmann Education Group.

▶

63

EXECUTIVE MOVES

▶

As part of this transition, the Bertelsmann Education Group headquarters will be fully based in the US. Krafft succeeds Jim Triandiflou, who is leaving Relias “for personal reasons and at his own request” on 31 March, after eight years in charge, and who will support the transition, as well as assuming an advisory role for Relias until at least the end of the year.

Krafft was previously a member of BMG’s board, helping to turn the music company from a start-up in 2008 into the industry’s fourth largest company worldwide.

Sallie Mae Sallie Mae, the saving, planning, and paying for college company, formally SLM Corporation, has announced that its chief executive, Raymond Quinlan, is stepping down next month, to be replaced by Jonathan Witter, currently chief customer of Hilton Worldwide Holdings.

Quinlan will continue to work with Witter and the company as chairman of the board until Sallie Mae’s annual general meeting on 18 June, when a new chairman will be appointed.

Witter is an industry veteran with nearly three decades of executive leadership, banking expertise, and operational management. At Hilton, Witter oversaw the company’s global brands, marketing, loyalty and partnerships, IT, and strategy teams. He was previously Capital One’s president of retail and direct banking for seven years. Before that he was chief operating officer of Morgan Stanley’s retail banking

Jonathan Witter, Sallie Mae

EducationInvestor Global • April/May 2020

group, and was executive vice-president and head of general bank distribution at Wachovia.

Sunlands Technology Group Online post-secondary and professional education company Sunlands Technology Group has appointed Selena Lu Lu, the company’s chief strategy officer as chief financial officer, replacing Steven Yipeng Li, who is resigning for personal reasons. Lu will also continue as chief strategy officer of the company.

Li and Lu will work together to ensure a smooth transition which takes place on 30 April.

Lu has worked in her current role since joining the company in July 2015 and has been a part of the senior management team that has led three rounds of private financing and the company’s IPO. She previously worked as a partner at Taihe Capital and as an executive director at Hina Investment Group, two boutique investment banks.

THE THE, the London-based provider of higher education data and insights, has appointed Paul Howarth as chief executive, replacing Trevor Barratt, who led the business since June 2014.

Howarth was previously chief executive for four years at Law Business Research, a provider of business information, legal analysis tools and networking for the global legal markets.

He has a background in business strategy, content and education, having worked for the

Raymond Quinlan, Sallie Mae

Financial Times and Pearson Education, before running educational publisher Nelson Thornes, and working with the international student pathways business while at Kaplan. He also has experience in growing businesses, including managing acquisitions.

Wonderschool San Francisco-based early childhood education provider has appointed Daniel Breiner as vice-president of product. Breiner joins from competitor WeeCare and has extensive product and marketplace experience from his time at Dog Vacay and Omaze.

Zovio Chandler, Arizona-based education technology services company Zovio has appointed Chris Spohn to the newly created position of executive vice-president of operations, effective 30 April, responsible for providing strategic leadership and direction for student engagement, student success, financial services, and Zovio Employer Services.

Spohn has more than 20 years’ leadership and operational experience in the online higher education and technology services industries.

He has worked in executive leadership positions for several technology and education services companies, including Webwise Education and Higher Education Online. He was previously president of Rocky Mountain College of Art and Design, where he completed a total re-engineering of all operations related to the university. n

Paul Howarth, THE

65

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