2015 investment opportunities in European...

2015 investment opportunities in European education February 2015

Parthenon-EY | Page 2

Agenda Introduction to Parthenon-EY

Introduction to the Parthenon-EY Education practice

Overview of investing in European education


Introduction to Parthenon-EY Deep industry experience in numerous sectors

Consumer Education Financial services

Healthcare Life sciences Information and media

Private equity Industrial Technology

$


Introduction to Parthenon-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




Overview of investing in European education


Introduction to the Parthenon-EY Education practice Over 1,000 education projects in more than 70 countries…

Major offices

Education projects completed by Parthenon-EY

Pre-Kindergarten K-12 University Vocational and other

Career and professional


Introduction to the Parthenon-EY Education practice …across the entire education landscape…

Pre-K, primary and secondary

Nurseries K-12

Higher education

Further, vocational and employability

Tutoring and test preparation

Pathway

6th form

Continuous

Foun

datio

n

Post-secondary

Prof

essi

onal

and

ex

ecut

ive

Cor

pora

te

Language (including EFL)

Publishing

Educ

atio

n de

liver

y Ed

ucat

ion

supp

ort

serv

ices

Technology Assessment Professional support

Polic

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

Infra-structure

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




Overview of investing in European education Recent deal activity Global education themes Businesses to watch in 2015


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

0

20

40

60

80

100%

Educational delivery

Specialist SEN and educational care

Nurseries

K-12

Further, vocational employability

Professional training

Language (including EFL)Pathway provider

Tutoring and test preparation

Corporate training

Higher education

142

Educational support

Recruitment

Technology platforms ande-learning tools

Traditional publishers

Other services

Digital content

59 Total = 201

Training and professional development

~£90b ~£3bPublic and private expenditure

~£10b ~£3bPrivate expenduture

UK market

size

Source: Preqin, Baird, Parthenon analysis

Number of PE deals in education by sector, Europe, 2004 – 2014


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

5

4

9

2005

2

6

8

2006

10

5

15

2007

16

7

23

2008

14

5

19

2009

10

4

14

2010

19

6

25

2011

17

5

22

2012

16

3

19

2013

22

9

31

2014

11

5

16

Educational support

Educational delivery

• Growing deals in sector driven by educational delivery

• Softening in 2014; deal volume expected to be close to 22


Recent deal activity The proportion of deals in the UK is falling as European markets grow: deal volume typically falls before elections

0

10

20

30

40

2004

1

6

11

9

2005

5

128

2006

3

3

5

11

2

15

2007

22

15

11

2

23

2008

2

3

10

11

2

19

2009

4

4

4

11

14

2010

4

2

8

4

1

3

21

25

2011

22

7

9

11

22

2012

11

13

1

111

19

2013

4

4

14

6

1

2

31

YTD2014*

22

6

4

11

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



Source: Preqin and Baird






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

0.7X 1.

0X

2.1X

Germany

0.9X 1.

0X

1.6X

UK

0.7X 1.

0X

1.6X

Below Upper SecondaryUpper 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


0

20

40

60

80

100%

EmployabilitySkills

%of

Em

ploy

ers

Men

tioni

ng

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

dem

icW

ande

rer

Coming ofAgeAspiring 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 and public HE enrolments, selected countries, 2010-12 (CAGR)

US university student segments

Employer’s 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)

PrivatePublic

BKF University of

Applied Sciences, Budapest

QA learndirect Bimm The University of Law


Emerging education themes In parallel, technology and accountability are driving the development of new products, especially in K-12

E-volution Increased accountability and 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-Le

arni

ng e

xpec

tatio

ns

Testing

Professional support


Renaissance Learning

Education Personnel itslearning

Publishing and digital content Testing


Renaissance Learning GL Education itslearning


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

Inve

stm

ent t

hesi

s In

vest

ors

and

thei

r ass

ets

► 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


► 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

Cha

lleng

es to

inve

stm

ent t

hese

s

• 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 child’s 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

King’s 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






Pre-K K-12 Corporate andprofessional

Highereducation

Vocational andemployability

Educationalservices

<£5M

£5M - £10M

£10M - £20M

£20M+

The Institute of Contemporary Music

Performance

A4e Mander Portman

Woodward

Businesses to watch in 2015 UK

Est

imat

ed E

BIT

DA

UK

Source: Preqin, Capital IQ, OneSource and Parthenon Analysis

QA

StudyGroup

learndirect

Alpha Plus

BPP

GSM London

Lifetime Fitness

Kedleston Schools Treetops

Nurseries

Kisimul

Playforce Phoenix Learning & Care

Orbitaled

Polestar

Solar Care

Group

David Game

Alpha Schools Group

Kings Education

Bimm

MetFilmSchool

paragon Explore

Learning Itnmark

Education

Babington Business College Judicium

Education

Fleet Tutors

Educaedu

Oxford Royale Academy


Pre-K K-12 Corporate andprofessional

Highereducation

Vocational andemployability

Educationalservices

<£5M

£5M - £10M

£10M - £20M

£20M+

Businesses to Watch in 2015 Europe

Est

imat

ed E

BIT

DA

Source: Preqin, Capital IQ, OneSource and Parthenon Analysis

Europe

Babilou

AcadeMedia

Doga Koleji

Internationella Engelska

Skolan

Les Petits Chaperons

Rouges

Vindora Empik School

Seagull Okyanus Kolejleri

Studiekring

Collège Du Léman

Anabilim Studienkreis

ASC International House of Education Group

Institut F2i

Career Partner Hibernia

College Dublin

Baggium Vaughan Systems

Weidinger & Partner

Fleurus Presse

Osprey Publishing

Semantix

Inläsningstjänst AB

Leya Portugal

Wydawnictwa Sckolne

i Pedagogiczne

Swiss Education

Group

Studialis NCOI

Opliedingsgroep

Noordhoff Uitgevers


Agenda Appendix


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About Parthenon-EY

Parthenon joined Ernst & Young LLP on August 29, 2014. Parthenon-EY is a strategy consultancy, committed to bringing unconventional yet pragmatic thinking together with our clients’ smarts to deliver actionable strategies for real impact in today’s complex business landscape. Innovation has become a necessary ingredient for sustained success. Critical to unlocking opportunities is Parthenon-EY’s ideal balance of strengths – specialized experience with broad executional capabilities – to help you optimize your portfolio of businesses, uncover industry insights to make investment decisions, find effective paths for strategic growth opportunities and make acquisitions more rewarding. Our proven methodologies along with a progressive spirit can deliver intelligent services for our clients, amplify the impact of our strategies and make us the global advisor of choice for business leaders. About Parthenon-EY’s Education practice Parthenon has served as an advisor to the education sector since its inception in 1991. The Parthenon-EY 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 experience 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.

Appendix About Parthenon-EY and the Education practice

Twitter | @Parthenon_EY

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Learn more about us at www.parthenon.ey.com

Matthew Robb Managing Director

[email protected] +44 (0) 207 201 0475 +44 (0) 779 134 9 228

Courtney Gainer Vice President

[email protected] +44 (0) 207 201 0459 +44 (0) 781 468 5339

EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. “Parthenon” and “Parthenon-EY” refer to the combined group of Parthenon and EY professionals providing strategy services worldwide. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. © 2015 Ernst & Young LLP. All Rights Reserved. 150906 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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