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s families become more internationally mobile and emerging economies continue to develop, international schools have grown into an important segment of the
global education sector. This has created opportunities for established school brands to expand beyond their home markets and develop new campuses in some of the world’s fastest-growing regions. We look at trends in the United States, Asia, Middle East and Europe and examine what are the key drivers of expansion, as well as the influence of hybrid education, AI and the importance of language and culture in international school provision.
EXPANDING PROVISION IN INTERNATIONAL SCHOOLS Education is now a multinational enterprise. Private equity firms, sovereign wealth funds and specialist education operators are investing heavily in the development of new schools and education platforms. Large education groups are consolidating the market through acquisitions and partnerships, and schools with strong internationally recognised brands are looking for opportunities in new markets. While many schools were originally family-owned
enterprises, in recent years there has been investment from private equity firms for whom education is a long term, cash-generative business. Historically, international schools were primarily set
up to serve the children of expatriate families working overseas. Today, however, a large proportion of students attending international schools are local families seeking an internationally recognised curriculum, and a pathway to leading universities around the world, as well as more traditional expat families. Programmes such as the International Baccalaureate (IB) as well as the British and American curriculums are popular among parents who view international schools as offering greater options for students and providing a potential gateway for universities in the UK, Canada, Australia and the United States.
WHAT IS DRIVING THE GROWTH OF INTERNATIONAL SCHOOLS? The number of international schools worldwide has grown steadily, particularly across Asia, the Middle East, and parts of Africa. Locations such as Dubai, Singapore, Bangkok, Ho Chi Minh City, and Shanghai have become major hubs for international education, attracting investment from existing operators of schools groups and institutional investors including private equity funds. At the same time, emerging markets in countries such as Vietnam, India, and Indonesia are witnessing strong demand as the growing middle classes there look for quality schools for their children. “Private equity has been investing in education for
the best part of twenty years,” says Ashwin Assomull, partner and founding member of the Global Education Practice at
L.E.K.Consulting.
“There has been more capital going into this market because as schools expand and you build out your footprint, you need capital. Private equity is a natural source of that capital, because it tends to take a five year view, although many funds have a longer term horizon even than that.” He cites Nord Anglia Education, which has had
private equity investment since 2010, and Dukes Education which has funding from KKR. International Schools Partnership (ISP) has backing from CVC, and Inspired Education has backing from Stonepeak, Warburg Pincus, and a number of other private equity funds. GEMS, based in Dubai, has capital from Brookfield Asset Management, having previously had CVC as a stakeholder. “Private equity is very much part of the financial
structure for a lot of these school groups,” he says. “The attraction for private equity investors is the very solid, stable returns, low volatility, and good performance even through recessions. If you have got a K-12 school, the child can join in kindergarten and stay all the way through to 12th grade, so you have a lot of revenue visibility, and you have good working capital conditions, since you get paid your fees at the start of the term, three or four months in advance. You pay your rent and your teacher salaries on a monthly basis, and if you have a successful school, you can increase fees in line with inflation or more, which makes it a very attractive investment for private equity.” The global reach of education platforms also
appeals to investors because having schools in different geographical regions means the portfolio of assets can be diversified. “It helps to de-risk the portfolio,” he explains. “If
your Middle East platform has a downturn in enrolment because the macro situation is not favourable, your Asia portfolio might be performing better. With a globally diversified portfolio you can smooth out any shocks to the system.”
OPPORTUNITIES IN THE MIDDLE EAST Rising economic prosperity in developing regions has increased the number of families able to afford international school fees. Governments in some countries, such as Dubai, are also encouraging private sector participation in education to meet growing demand and attract foreign investment. However, with this comes a stipulation that schools must also adhere to the government vision and requirements. “For any school planning to expand outside their
home market, it is important to do your research carefully,” says Ashwin Assomull of L.E.K. “It is not just about the country or city, it is about the catchment area that you will be targeting,” he explains. “Make sure that you have selected the right partner. Do thorough due diligence and be very clear to the board of governors how much control you are actually going to exert in the school. An emerging trend is that the investor is part of an established education group and wants to run the
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GUIDE TO INTERNATIONAL EDUCATION & SCHOOLS INTERNATIONAL EDUCATION MARKETS
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