French education deals offer a valuable lesson

The French education sector saw a frenzy of private-equity-backed deals in 2018, with eight investments totalling a valuation of €273m. The high level of activity was also noticeable in the first quarter of this year, with four deals completed in the sector, including Cinven’s acquisition of Inseec U from France-based Apax Partners for around €800m.

Investors are looking at education as a good bet in the current environment, though they are likely paying high multiples at entrance. The sector is attractive to private equity for several reasons. First, it is seen as a non-cyclical industry. Bertrand Pivin, partner at Apax, says: “Education is invaluable both in a healthy labour market, in order to obtain the best jobs available, as well as in times of greater hardship, as an additional degree or course can considerably help one’s jobs prospects.”

Moreover, it offers plenty of consolidation opportunities in the region. “Private education is very fragmented in France, as it is not as well developed as in the US and the UK,” says Pivin. “We have been looking upon the American and British higher education business models for inspiration.”

Additionally, the university sector is in need of modernisation, which opens up opportunities for private equity. Giving some background on the university system in the region, Pivin says: “What we have seen in France is that the public higher education system, despite being very rigorous, selective and having the advantage of costing very little, sometimes poorly prepares students for the world outside of academia. The private sector is bridging that gap between academia and employers’ expectations.”

Under Apax’s ownership, Inseec U accelerated its growth in a number of ways, including broadening the course base, expanding the range of programmes offered, pursuing a buy-and-build strategy and opening campuses in San Francisco, Shanghai and Geneva. Digitalisation is, of course, also permeating the sector. “Digitalisation was one of the ways we have initiated Inseec U’s services improvement for prospective students, enrolled students and alumni,” says Pivin. “When looking up courses while choosing which university to enroll in, going through the admission process, working on projects or preparing for exams, they will easily obtain what they need from Inseec U via its revamped online platform.”

Scaling up skills
Businesses providing distance learning education via online platforms are booming. Since 2016, eight transactions in companies offering online distance learning, or related services, have taken place, against only three deals between 2011-2015.

These online courses and training services often relate to skills that are not exclusively academic. For example, Skill & You, which was acquired by Andera Partners, offers around 200 distance learning courses in various fields, such as cooking, childcare, mechanics and aesthetics. Moreover, Toutapprendre.com, backed by Capital Croissance, operates online courses, with content across several fields, including languages, school support, multimedia, health and wellness, personal development and music.

Three of the companies backed by private equity in 2018 focus on training related to digital skills, including IT, web and multimedia. Given the value and importance of computer skills to today’s workforce, there is a strong argument for investment in this area.

Finally, the case of Silvya Terrade, a group that trains students in various beauty, well-being and hairdressing disciplines, exemplifies ways in which consolidation can take place in the sector. Entrepreneur Venture Gestion first provided backing to the business in 2014, which, at the time, consisted of one school. Since then it has been owned by EPF Partners (now part of Apax France), Entrepreneur Venture Gestion and other undisclosed investors. A 70% stake was sold to Abénex Capital last year and today the group operates 47 schools across France, Switzerland and the UK.

The development of privately owned higher education groups, the rapid growth of online course providers and the creation of groups providing courses in non-academic skills are all proving popular opportunities currently offered by the sector. 

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