Private matters

Simone Rensch presents the best bits of this year’s Private Equity in Education conference

Going for growth – The role of venture capital in education

Emma Lancaster, Study Group

Private matters – The burgeoning opportunity for buyout houses

More than 80 delegates gathered in London on 26 February at this publication’s ninth Private Equity in Education conference to explore opportunities and challenges facing the market.

Hot on the heels of Brexit, which was finalised at the end of January, it was apt that the keynote, delivered by Alex Canfor-Dumas, director of Flint Global, reflected on what was a defining year for UK politics, which saw the Conservative Party win a sweeping majority in parliament. In the keynote, titled Politics, education and private equity, he said that the government has shifted its focus from higher education to further education, which presents flourishing opportunities for investors. “Higher education is not viewed by this Conservative government as a solution to the skills gap in this country,” said CanforDumas. “Further education is a political priority.”

Following the keynote, Anna Grotberg, associate partner at EY-Parthenon’s education practice, shared market insights in a presentation titled Train-and-gain: Consolidation in the UK apprenticeships market. She highlighted that the apprenticeships market remains highly fragmented, presenting an optimal environment for private equity roll-ups. “All the trends look positive if you’re investing behind the right business in the right part of the sector,” said Grotberg. Of the 1,395 apprenticeship businesses in the UK, 966 are private companies. She added that most of the “winning” models are large platforms, of which there are few. “If you are investing in the sector, really understanding the customer base you are investing in is critical.”

Uniting the first ever all-female panel at a Private Equity in Education conference, Kathryn Skelton, chief transformation officer of FutureLearn, chaired Going for growth: The role of venture capital in education. Rosie Bailey, chair of Enthuse, Melody Lang, chief executive of MPA Education, and EY-Parthenon’s Grotberg discussed how to strike a balance between educational and social impact and commercial gains. Lang believed it was possible to be both “for-profit and for good”. In this context, she added that she steers clear of the K12 and higher education sectors, which she said are “extremely challenging”. She instead focuses on corporate and life-long learning, as well as business services. At the venture capital level, one shouldn’t focus too much on EBITDA, added Grotberg, but should look at the fundamentals of a business, such as quality and outcomes.

Following a networking break, Emma Lancaster, chief executive of Study Group, a global pathway provider, explored her firm’s relationship with its private equity owner Ardian, which acquired the business last year. She said: “There is investment in this sector and we are under pressure to move at pace – which you have to do in a market that is rapidly growing.” The business is hoping that online learning will help it more quickly achieve scale. Lancaster fielded questions from audience members around the impact the coronavirus outbreak (see pages 18-25) is having on Study Group’s operations; she said that the firm’s educational agents in China were worst affected.

Next, Alan Diaz, former senior vice president at Laureate Education, chaired a session titled Private matters: The burgeoning opportunity for buyout houses, which brought together John Forsyth, chief executive of Forfar Education; Andrew Cleland-Bogle, partner at EQT Credit; Jamie Edge, EMEA head of education and training M&A, EY Corporate Finance; and Fabrizia Rizzi, assistant director, Inflexion. Discussing opportunities and pitfalls in the European education market, panellists agreed that demand for private education continues to rise. Forsyth said: “On paper, schools are very simple business… but to create a successful school is a barrier to entry. If you try to run a school from a spreadsheet, you’ll probably not survive.” On the other side of the coin, Rizzi said K12, as a sub-sector, has the highest barriers to entry – which can be “a good or a bad thing, depending on which side you’re on”, Diaz commented.

Imad Ghandour, co-founder and managing director of buyout house CedarBridge Partners, delivered a presentation titled Making the grade in MENA, sharing insights into opportunities in the Middle East and Africa, highlighting Dubai, Saudi Arabia and Egypt as promising jurisdictions. “We are in the business of deploying money at good opportunities – and I think there are still opportunities in Dubai’s K12 market. There’s opportunity to buy schools constantly and to earn good returns.” Higher education in Saudi Arabia is still in its infancy and there’s “a huge opportunity that can be tapped”, he said.

The day concluded with a panel titled Leveraged buyouts through a management lens. Chaired by Andrew Steen, sales and marketing director at Altius Group, the panel united David Johnson, chief executive and founder of Just Childcare; Ruth Pimentel, chief executive at Kindred Nurseries; and Sarah Steel, managing director at the Old Station Nursery Group, who shared their experiences of private equity takeovers from a nursery market perspective. Steel, a self-proclaimed “newbie” to the world of private equity, pointed to a dearth of knowledge in her sector about private equity, its benefits and pitfalls. Pimentel agreed, saying that going from a small nursery owner to working with private equity is “a totally different world”.

Steel said that it is key for private equity investors and operators to strike a balance between earnings potential and educational outcomes. However, panellists noted that the two factors are intrinsically linked. Johnson stressed the importance of safeguarding reputation: “You are looking after a family’s most precious asset… Reputation is the most crucial thing to all of us – reputation can kill your business.”

Drawing the day to a close, Steen asked panellists whether they thought the early years market will see a £100 million deal in 2020. Steel and Pimentel replied “no” right away. Johnson, however, was more optimistic: “Who knows. It’s possible – but it’s likely to take another year or two… but it could happen.” n

Event partner

Produced by

Alex Canfor-Dumas, Flint Global

Anna Grotberg, EY-Parthenon

Jamie Edge, EY Corporate Finance