23
2015 Investment Opportunities in European Education February 2015
2015 Investment Opportunities in European Education February 2015
Parthenon | Page 2
Agenda Introduction to Parthenon and EY
Introduction to Parthenons Education Practice
Overview of Investing in European Education
Parthenon | Page 3
Introduction to Parthenon and EY Deep industry expertise in numerous sectors
Consumer Education Financial
Services
Healthcare Life Sciences Information
and Media
Private Equity Industrial Technology
$
Parthenon | Page 4
Introduction to Parthenon and EY Comprehensive coverage of strategy and transaction processes
* Services delivered in collaboration with other TAS and Advisory competencies.
Commercial due diligence
Divestiture preparation
Forecast achievability
assessment
Merger and acquisition strategy
Target identification/prioritization
Brand audit
Cost optimization
Marketing mix effectiveness
Pricing
Sales force effectiveness
Product strategy
Post-merger integration
Growth strategy
Market diligence
Market entry strategy
Intellectual property monetization
New market development
Portfolio optimization
Strategic options assessment
Corporate/business unit strategy
Competitive analysis and strategy
Economic forecasting/modeling
Innovation
Marketing/distribution strategy
Strategic resource allocation
Parthenon | Page 5
Agenda Introduction to Parthenon and EY
Introduction to Parthenons Education Practice
Overview of Investing in European Education
Parthenon | Page 6
Introduction to Parthenons Education Practice Over 1,000 education projects in more than 70 countries
Major offices
Education projects
completed by Parthenon
Pre-Kindergarten K-12 University Vocational
and Other
Career and
Professional
Parthenon | Page 7
Pre-K, Primary and Secondary
Introduction to Parthenons Education Practice across the entire education landscape
Nurseries K-12
Higher Education
Further, Vocational and
Employability
Tutoring and Test Preparation
Pathway
6th Form
Continuous
Fo
un
da
tio
n
Post-secondary
Pro
fessio
na
l a
nd
Ex
ec
uti
ve
Co
rpo
rate
Language (Including EFL)
Publishing
Ed
uc
ati
on
De
live
ry
Ed
uc
ati
on
Su
pp
ort
Se
rvic
es
Technology Assessment Professional
Support
Po
lic
y Government Policy
Foundation & Not-for Profit Policy
Traditional Publishing
Digital Content
Technology Platforms and e-Learning Tools
Testing School Improvement
Legal and Financial
Recruit-
ment
Infrastr
ucture
IT
Accommodation Property and Construction Technology Infrastructure
Specialist SEN and Educational Care
Managed Services
Facilities Management (e.g. Catering, cleaning, security)
Software
Training
& Prof.
Dev.
Administration (e.g. Payroll)
Other Services
Learning Services (e.g. Learning Specialist Support)
Learning Supplies
Hardware Supplies
Awarding Bodies
Educational Tours & Travel
Procure-
ment
Parthenon | Page 8
Agenda Introduction to Parthenon and EY
Introduction to Parthenons Education Practice
Overview of Investing in European Education
Recent Deal Activity
Global Education Themes
Businesses to Watch in 2015
Parthenon | Page 9
Recent Deal Activity ~200 PE deals have taken place in the sector since 2004; deal volumes between ed. support and ed. delivery are broadly inline with private spend
Number of PE Deals in Education by Sector, Europe, 2004 2014
0
20
40
60
80
100%
Educational Delivery
Pathway Provider
Language (including EFL)
Tutoring and Test Preparation
Higher Education
Corporate Training
Nurseries
Specialist SEN and Educational care
K-12
Professional Training
Further, Vocational Employability
142
Educational Support
DigitalContent
Recruitment
Technology Platforms ande-Learning Tools
Traditional Publishers
59 Total = 201
Other ServicesTraining and Professional Development
~90B ~3BPublic and and Private Expenditure
~10B ~3BPrivate Expenduture
UK Market
Size
Source: Preqin, Baird, Parthenon Analysis
Parthenon | Page 10
Recent Deal Activity Deal volumes have grown; the growth is in education delivery rather than services
Source: Preqin and Baird
Number of PE Deals in Education by Year & Segment, Europe, 2004 2014
0
10
20
30
40
2004
4
5
9
2005
6
2
8
2006
5
10
15
2007
7
16
23
2008
5
14
19
2009
4
10
14
2010
6
19
25
2011
5
17
22
2012
3
16
19
2013
9
22
31
2014
5
11
16
Educational Support
Educational Delivery
Growing deals in sector driven by educational delivery
Softening in 2014; deal volume expected to be close to 22
Parthenon | Page 11
Recent Deal Activity The proportion of deals in the UK is falling as European markets grow: deal volume typically fall before elections
0
10
20
30
40
2004
1
6
1
1
9
2005
5
1
2
8
2006
3
3
5
1
1
2
15
2007
2
2
15
1
1
2
23
2008
2
3
10
1
1
2
19
2009
4
4
4
1
1
14
2010
4
2
8
4
1
3
2
1
25
2011
2
2
7
9
11
22
2012
1
1
13
1
1
1
1
19
2013
4
4
14
6
1
2
31
YTD2014*
2
2
6
4
1
1
16
67% 45% 38%63% 33% 65% 53% 29% 32% 32% 68%% UK
UK
Sweden
Germany
Netherlands
France
Switzerland
Spain
Other
Number of PE Deals in Education by Year & Country, Europe, 2004 2014
UK General
Elections
UK General
Elections
UK General
Elections
Source: Preqin and Baird
Parthenon | Page 12
Agenda Introduction to Parthenon and EY
Introduction to Parthenons Education Practice
Overview of Investing in European Education
Recent Deal Activity
Global Education Themes
Businesses to Watch in 2015
Parthenon | Page 13
Global Education Themes Post-secondary enrolment growth is being driven by rising wage differentials and emerging market household income growth
Rising Tertiary Enrolment Ratios and Income Differentials Rising Household Income Driving Student Mobility
Bilateral Flows of International Students
0
20
40
60
80
100%
2007
47%
2008
50%
2009
53%
2010
57%
2011
62%
Germany HE Gross Enrolment Ratio
0X
1X
2X
3X
Hungary
0.7
X 1.0
X
2.1
X
Germany
0.9
X
1.0
X
1.6
X
UK
0.7
X 1.0
X
1.6
X
Below Upper Secondary
Upper Secondary (Base)
Tertiary
Earnings of 25-64 Year Olds by Qualification Level, 2011
Higher Education Professional and Executive K-12 Pathway & HE Language (EFL)
University of Kent BPP Nord Anglia
Education
Cambridge
Education Group
British
Council
Parthenon | Page 14
0
20
40
60
80
100%
EmployabilitySkills
%o
fE
mp
loye
rsM
en
tio
nin
g
82%
Degree Subject
68%
Relevant WorkExperience
67%
Degree Result
50%
UniversityAttended
8%
ForeignLanguage Capability
4%
0 20 40 60 80 100%
USUniversityStudent
Population
Industry SwitcherCareer StarterCareer Accelerator
Aca
de
mic
Wa
nd
ere
r
Coming ofAge
Aspiring Academics 100%
Emerging Education Themes leading to the rise of the non-traditional students and liberalisation of the private market
Non-traditional Students Liberalisation and Role of the Private Sector
Growth in Private & Public HE Enrolments,
Selected Countries, 2010-12 (CAGR)
US University Student Segments
Employers Most Important Recruitment Criteria, UK
Higher Education Professional and Executive
Further, Vocational and
Employability Higher Education
Professional
and Executive
-10
0
10
20
70%
US
5%
1%
France
3%
0%
UK
69%
-3%
Germany
20%
5%*
37% 18% 6% 5%Private Share(2012)
Private
Public
BKF University of
Applied Sciences,
Budapest
QA learndirect Bimm The University
of Law
Parthenon | Page 15
Emerging Education Themes In parallel, technology and accountability are driving the development of new products, especially in K-12
E-volution Increased Accountability & Competition
Maths PISA Scores, 2012 E-Learning Developments
0
200
400
600
800
Shanghai-China
613
Singapore
573
HongKong-China
561
ChineseTaipei
560
Korea
554
Germany
514
France
495
UnitedKingdom
494
UnitedStates
481
1 362 3 4 5 16 25 26Rank (/65)
Time
Innovation Trigger
Peak of Inflated
Expectations
Trough of Disillusionment
Slope of Enlightenment
Plateau of Productivity
E-L
earn
ing E
xpecta
tions
Testing
Professional
Support
Technology Platforms and
e-Learning Tools
Renaissance
Learning
Education
Personnel itslearning
Publishing and
Digital Content Testing
Technology Platforms and
e-Learning Tools
Renaissance
Learning GL Education itslearning
Parthenon | Page 16
Emerging Education Themes Attractive investment theses currently include most of post-secondary education and special educational needs
Private Higher Education
Vocational (Mainly UK) Corporate Training SEN (Mainly UK) Technology
Post-secondary K-12
Investm
en
t T
hesis
In
vesto
rs a
nd
T
heir
Assets
Fastest HE enrolment growth
will come from non-
traditional students looking
for employment related
courses
Private for-profit providers
will benefit most as they are
focused on:
- Career orientated subjects
(e.g. IT, business etc.)
- More tailored University
experience with smaller
class sizes and
specialised facilities
- Career office and
counselors focused on
specific industries with
strong links to employers
Providers best positioned to
grow have:
Quality outcomes and ratings
- Employer connections
- National
coverage/capability
- Online offering
- The sector remains
fragmented and subject to
consolidation
Corporate spend on
professional training will
increase as economic growth
recovers
Spend on outsourced
training will be prioritized for
specialist areas
Online capabilities which
allow for flexibility (time and
location) will be most
attractive to employers and
students
There is an increasing
preponderance for provision
of special education needs
which is being supported by
robust government funding
and a continued pupil bulge
Opportunities exist for a
multisite strategy similar to
what has been achieved in
traditional K-12 models
US K-12 technology
companies developing real
scale
Most of Europe still have to
small domestic markets to
build scale
Sovereign
Capital
CEE Equity
Partners
Studialis Bregal
Capital
GSM
London BKF
Sovereign
Capital LDC
Lifetime
Training
Bridges
Ventures
learndirect
Babington
Business
College
Auctus Bregal
Capital
Career
Partner QA
Hellman &
Friedman EQT
Renaissance
Learning itslearning
Teachers'
Pension Plan
Acorn Care and Education
Parthenon | Page 17
Whilst parental demand for a premium fee-paying K-12 school continues to grow,
without an existing platform it may be a challenge to secure the acquisition of an
asset
The UK market has become increasingly crowded with several established
platforms looking to grow through acquisition
Opportunities may exist in Europe and globally
GEMS Schools
Emerging Education Themes but two of the most attractive investment theses in recent years (K-12 and traditional international pathways) may becoming more challenging for new entrants
Buy-and-build UK, US, Aus
K-12 Traditional International Pathways
Ch
allen
ges t
o In
vestm
en
t T
heses
Is its possible to enter the market through a smaller asset and compete with the large global pathway providers?
There are examples of some growing smaller providers, but it is becoming more challenging to find the opportunities to scale
There may be an opportunity to target students at a younger age. Parents from key source countries are making their childs HE decisions at an earlier age for a number of reasons
- Immersive English language
- Assess to higher ranked universities
- Greater portability of international school qualifications
Minerva Education Cognita
Teaching Excellence
Bellevue
Education
Kings Group ACS International
Schools
EDUCAS Alpha Plus
HIG Capital Magnum Capital
Industrial Partners
International School
of Europe
International Schools
Partnership Laude Colegios
Nace Centros
Educativos
Cambridge
Education Group
Navitas
INTO
StudyGroup
Kaplan
Shorelight
Education
Kinds
Education
Oxford International
ISIS Education
Parthenon | Page 18
Agenda Introduction to Parthenon and EY
Introduction to Parthenons Education Practice
Overview of Investing in European Education
Recent Deal Activity
Global Education Themes
Businesses to Watch in 2015
Parthenon | Page 19
Pre-K K-12 Corporate &Professional
HigherEducation
Vocational andEmployability
EducationalServices
Parthenon | Page 20
Pre-K K-12 Corporate &Professional
HigherEducation
Vocational andEmployability
EducationalServices
Parthenon | Page 21
Agenda Appendix
Parthenon | Page 22
Appendix About Parthenon and the Education Practice
About Parthenon-EY Parthenon combined with Ernst & Young LLP on August 29, 2014. Parthenon is a leading advisory organization focused on strategy consulting. We are
committed to combining our unconventional thinking with our clients smarts to deliver actionable strategies. In todays comp lex business landscape, creativity has
become a necessary ingredient for sustained success. Together with EY, we have an ideal balance of strengths specialized expertise with broad executional
capabilities, intimate client relationships with larger networks of support, and proven processes along with a progressive spirit to unlock opportunity for our
clients, amplify the impact of our strategies, and make Parthenon the global partner of choice for business leaders.
About Parthenons Education Practice Parthenon has served as an advisor to the education sector since our inception in 1991. Our Education Practice the first of its kind across management
consulting firms has an explicit mission and vision to be the leading strategy advisor to the global education industry. To achieve this, we invest significantly in
dedicated management and team resources to ensure that our global expertise extends across public sector and non-profit education providers, foundations, for-
profit companies and service providers, and investors. Parthenon has deep experience and a track record of consistent success in working closely with
universities, colleges, states, districts, and leading educational reform and service organizations across the globe.
Learn more about us at www.parthenon.ey.com
Matthew Robb
Managing Director
+44 (0) 207 201 0475
+44 (0) 779 134 9 228
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Courtney Gainer
Vice President
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+44 (0) 781 468 5339
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