THE PARTHENON GROUP
Effectively Partnering With Higher Education Institutions
Parthenon Perspectives
January 2014
This document was created before Parthenon joined Ernst & Young LLP on August 29, 2014, and has not been updated to reflect the combination.
THE PARTHENON GROUP
2
What Informs Our Perspective
Parthenon teams have completed over 900 education
projects in more than 60 countries
Pre-Kindergarten K-12 University Vocational
and Other
Career and
Professional
Education Sector Projects
Completed by Parthenon
Parthenon Offices
THE PARTHENON GROUP
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What Informs Our Perspective?
Public and private sector work provides us with a strong
sense of what is happening “on the front lines”
We advise a number of
leading education institutions…
…and work with the private companies
trying to meet their needs
• Local educational authorities, states, and
governments
• Charter schools, private K-12 schools, and
other innovative education providers
• Global post-secondary institutions
• Foundations on the forefront of educational
reform
• Educational publishing
• Assessments
• Tutoring
• Intervention/Special Ed
• Technology providers
• Consumer education products
THE PARTHENON GROUP
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Context
Since Congress signed the GI Bill, presidents, provosts,
and trustees could wake-up every day confident that…
Next year will bring higher system-wide enrollments
1
We can continue to raise net prices ahead of inflation
2
Politicians, the press, and parents will still love us 3
“So let me put colleges and universities on notice.
Higher Education can’t be a luxury.
It is an economic imperative that every family
in America should be able to afford.”
– President Barack Obama
THE PARTHENON GROUP
5
0
2
4
6
8
10M
0
2
4
6
8
10M
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
Context
The sector faces flat enrollment growth and declining
pricing power for the foreseeable future
Note: Net tuition includes tuition revenue coming directly from students, net of institutional discounts and all grant aid; All figures are real and adjusted for inflation
Source: U.S. Census Bureau; College Board Trends in College Pricing; Parthenon HED Enrollment Forecast
H F
0.5
1.0
1.5
2.0
2.5
19
89
19
94
19
99
20
04
20
09
Overall Net Tuition
Private 4 Year
Public 2 Year
Real Household
Wage Income
Net Tuition
Tuition and Fees vs. Mean
Household Income
4-Year Not-for-Profit Contributions to
Enrollment Model, 1999-2019F
Temporary exceptional growth
due to high unemployment
during recession is expected to
return to normal
THE PARTHENON GROUP
6
0
2
4
6K
0.3K
2012
PurelyOnline
5.5K
107%
2008
('08-'12)
CAGR
$115MEst. Revenue
0
20
40
60
80
100K
2008
27.6K
2012
PurelyOnline
82.6K
32%
('08-'12)
CAGR
$523MEst. Revenue
Southern New Hampshire University
Enrollment
University of Southern California
Enrollment
Context
When traditional institutions undertake strategic initiatives
and begin to act commercially, they tend to thrive…
Arizona State University
Enrollment
Liberty University
Enrollment
0
4
8
12K
2007
2.7K
2012
Purely Online
20.0K
49%
('07-'12)
CAGR
$106MEst. Revenue
0
2
4
6
8K
2010
2.5K
2012
Purely Online
6.5K
61%
('10-'12)
CAGR
$46MEst. Revenue
Source: University financial statements, university websites, Fast Company, Deutsche Bank Report, NYT, Parthenon analysis
THE PARTHENON GROUP
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Context
…and their brands tend to triumph as well
0.0
1.0
2.0
3.0
4.0
6/2
00
7
6/2
00
8
6/2
00
9
6/2
01
0
6/2
01
1
6/2
01
2
6/2
01
3
Not for Profit
For Profit
Index of Google Searches for Top For-Profit and Not-For-Profit Institutions,
2007-2014
Note: For profit index consists of “University of Phoenix”, “Ashford University”, and “Kaplan University”; Not for profit index consists of “Liberty Online University”, “Western Governors
University”, and “SNHU”. Indices are indexed to one for the beginning period and represent a rolling 6 week average.
Source: Google Trends
(Liberty, WGU, SNHU)
(U of P, Ashford, Kaplan)
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Should our institution participate in transnational education and, if so, how? Transnational Education
How do we best align our educational offerings to the skills and capabilities
demanded by labor markets where our students seek employment?
Tighter Linkages
to Labor Markets
Have we identified the most critical business processes in our institution and
are they operating at a world-class standard?
Operational Efficiency
and Cost Reduction
Are our student outcomes truly world class and are we focused on
continuous improvements to educational delivery and student outcomes?
Focus on
Student Outcomes
The Opportunity
Higher education leaders are grappling with a series of
strategic questions…
What, if any, is the role of high-quality digital content and online modalities at
our institution?
What students are we trying to serve, and do we offer a holistic educational
environment and brand that is fully attuned to our target students’ needs?
Segmentation,
Differentiation,
and Branding
1
Online Modalities
2
3
4
5
6
THE PARTHENON GROUP
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The Opportunity …and they are becoming increasingly comfortable partnering with third parties to achieve those objectives
Note: *Aramark was founded in 1936 and AVI Food Systems in 1961 but it is not known when they started servicing universities **Bisk was founded in 1971 as a test prep company but did not enter online program development until 1998
Spectrum of University Functions Managed by Vendors (Representative, not Comprehensive)
Document and Data Storage
Finance and Accounting
Human Resources
Financial Aid and Student
Loans
Information Systems
Management Dormitories
Food Service
IT Support Institutional and Operational Support Enrollment Management Academics
Online Platform
Instruction
Course Development
Back End Front End Academic Core
Exam
ple
Vend
ors
1970s-80s 1990s-Today Inception of Outsourcing:
Uni
vers
ity F
unct
ions
Marketing and Recruitment
Student Coaching
Market Penetration of Outsourcing:
• XACT Telesolutions (1976)
• Infosys (1981)
• Affiliated Computer Systems (1988)
• Sallie Mae (1972)
• Nelnet (1977)
• Royall & Co (1989)
• ESM (1995) • QuinStreet
(1999)
• InsideTrack (2001)
• Embanet-Compass (1995)
• Deltak (1996)
• Bisk (1998*)
• Learning House (2001)
• Academic Partnerships (2007)
• 2Tor (2008)
• Educational Housing Services (1987)
• Aramark*
• AVI Food Systems*
THE PARTHENON GROUP
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The Opportunity
Universities have been slow to outsource;
Is Education analogous to Healthcare 20 years ago?
0
20
40
60
80
100%
IT Support
Currently Partner-Supplied
$15B
Finance andAccounting
$8B
HR
$3B $3B
$2B
$2B
Admissions
$11B
Developmentand
Alumni Affairs
$6B
Financial Aid andStudent Loans
Endowment Management
Marketing andRecruitment
Total = $50B
Postsecondary Institutional Expenditure, By Type of Spending
THE PARTHENON GROUP
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Ensuring Success Through Active Change Management
Parthenon believes this will be one of the most exciting
education markets for the next several years; but…
These are often long-term strategic partnerships and require extensive
change management expertise from the vendor
Segmentation,
Differentiation,
and Branding
Online
Modalities
Tighter
Linkages
to Employment
Transnational
Education
Operational
Efficiency
and Cost
Reduction
Focus on
Student
Outcomes
1
2
3
5
6
Change
Management
4
THE PARTHENON GROUP
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Ensuring Success Through Active Change Management
Impact analysis reveals the multitude of stakeholders
that must be considered and is critical at the outset…
THE PARTHENON GROUP
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Ensuring Success Through Active Change Management
…so too is establishing clarity around who will do what
and to what SLA…
THE PARTHENON GROUP
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Ensuring Success Through Active Change Management
…and finally exactly how the partnership will be
governed and supported
THE PARTHENON GROUP
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About The Parthenon Group and our advisory services
for investing in education
About The
Parthenon
Group
The Parthenon Group is a leading advisory firm focused on strategy consulting, with offices in Boston, London, Mumbai,
San Francisco, and Shanghai. Since its inception in 1991, the firm has embraced a unique approach to strategic advisory
services built on long-term client relationships, a willingness to share risk, an entrepreneurial spirit, and customized insights.
This unique approach has established the firm as the strategic advisor of choice for CEOs and business leaders of Global 1000
corporations, high-potential growth companies, private equity firms, educational institutions, and healthcare organizations.
The Parthenon Group advises clients in all stages of investing in education companies, including target identification and
screening, strategic due diligence, portfolio company strategy and operational improvement, and sell-side support. The
combination of Parthenon’s Private Equity Practice, which has advised clients on more than 1,000 transactions, and our
Education Practice, which has worked across all aspects of for-profit and non-profit education, make The Parthenon Group the
preeminent advisor to private equity firms considering investments in the education industry.
Learn more about us at www.parthenon.com.
Robert LytleCo-Head of Education
617.478.7096
Executive Assistant:
Deb Spitzley
617.478.6312
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Advisory
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Investing in
Education
Twitter | @Robert_S_Lytle
Jay Bartlett
Co-Head of Private Equity
617.478.4612
Executive Assistant:
Christa Semerjian
617.478.4661
