DC Discusses: Professional education continues to attract interest

Professional education and certification ticking the box for private equity

Companies aiming to dominate specialist segments are driving the appetite for consolidation. We see this in the professional training subvertical, as many professional fields are regulated by licensure requirements, with specialized training requirements. Many CE providers are expanding within professional fields in order to tap into a sticky customer base, grow organically, and dominate the segment.

High demand for professional training in the US is, in our view, driven by the regulatory requirements for licensed professionals to renew ‘credits’ in order to stay licensed and continue to work. Unlike soft skills training, which is often cyclical in nature and can see a decline in uptake during economic downturns, hard-skills training tied to licensure requirements can be more resilient to business cycles. Simply put, employers that need their employees to have credits in order to work, must pay the cost regardless of the wider economic environment.

We believe the recurring generation of revenue and the predictable B2B nature of professional training, continues to resonate with private equity investors in the US market. We’re seeing particular growth in training for healthcare professionals – it is no wonder when there are more than 135 medical specialities currently listed by the AAMC[2], each one representing an opportunity for training. Covid-19 brought unprecedented demand for healthcare professionals, and the staffing shortages for nurses and specialists that have come since the pandemic have only driven demand further.[3]

Test prep is another hot sub-sector within the US professional training sector. While B2C test prep offerings often are more transactional in nature as courses tend to serve one-time needs pre-licensure, there are also compelling B2B offerings in the sector. In 2020 we advised TrueLearn, a provider of online test prep for doctors, on its investment from private equity firm LLR Partners[4]. TrueLearn’s revenue is highly recurring since the company emphasizes its B2B offering providing test prep services to medical schools. In addition, there are compelling opportunities to combine test prep assets and continuing education assets to increase the lifetime value of the customer. Companies can acquire the customer through their pre-licensure test prep offering, while continuing to serve the customer’s lifetime learning needs with a continuing education offering.

In Europe, the Italian CE market boasts many large strategic players and PE funds, often expanding training offerings in specialized, vocational and higher education. In less than 12 months, PE backed Digit’Ed acquired 24ORE Business School[5], Scuola Greco Pittella[6] and Accurate[7] – education players specializing in business, law, and medicine respectively. We believe there will be further consolidation as global players seek opportunities to expand platforms across Europe, boosted by burgeoning European policy. In Italy, the Employability Guarantee of Workers[8] (GOL) was implemented in 2021 to establish a framework of active employment policies, whilst the New Skills Plan (NSP)[9] was brought in to increase the professional training available to help people integrate or reintegrate into the workplace. As regional authorities launch programmes to receive funding from these government reforms, we believe there will be increased investor interest in businesses that offer training that fall under the GOL purpose. Illustrating this trend, in July 2021, Alpha Test, a White Bridge Investments portfolio company and leading business in the field of university test prep, acquired both Boolean, an Italy-based provider of online courses for web developers and 700+ Club, a provider of test prep for international university entrance exams.[10]

Technology and online learning provide massive scalability opportunities

Asynchronous models – allowing learners to study independently at their own place and pace – can be a popular choice for the flexibility it offers learners, growing in usage as a result of the online learning acceleration driven by Covid-19. This model is massively scalable and therefore a key area of focus for private equity investors.

India however is largely a hybrid model market, servicing fundamentally different user needs. Hybrid models – combining online educational materials with in-person methods to tackle complex hands-on projects – are a popular choice for digital degree programs and oriented towards career transition with a higher bar for certification.

While we typically see many CE programs focus on technology training courses for career development, more and more companies are expanding to multi-discipline offerings. We believe this is due to a recruitment slowdown[11] in tech pointing to the inherent risks in a concentrated approach as well as diminishing returns on incremental market spends with a sector-geography combination.

Cross border transactions to compete on the global stage

In order to gain a higher international profile and ultimately become a global service, we’re seeing increased interest in India for cross-border transactions with the US and Europe, and vice versa. Many India based businesses struggle to raise organic awareness of their service offerings to potential customers abroad due to a comparatively smaller brand presence. In India, we see demand for cross border M&A to access top-of-the-funnel leads and marketing in Europe and the US as well as access to an Enterprise customer base. Additionally, cross border M&A can give access to specialist training capability for India players.

For US and Europe CEs looking at India acquisition opportunities, we are seeing interest driven by cost and opportunity. India is seen as a delivery base for higher value hybrid programs with good availability of an instructor talent pool at lower cost, as well as a low-cost hub for content creation and assisted sales. As part of a large and growing market, especially with twinning programs, India based businesses are becoming increasingly attractive for cross border opportunities.

Some players are diverse in their global footprint, whilst others may focus intently on the India corridor. Some geographies that are poorly covered by CE companies, including Southeast Asia and Africa, may present opportunities for businesses looking to expand in less crowded markets.

Within the world of EdTech, we believe there are significant drivers that will continue to stoke demand for CE assets. The requirements of professional training, combined with the resilience of the sector, recurring consumer demand, consolidation opportunities and opportunities to scale should continue to drive interest and investment activity next year and beyond.

To discuss any of the themes in this piece further, get in touch with Justin Balciunas > Nitin Bhatia > or Giuliano Guarino >

This article has been prepared solely for information purposes and is not intended to function as a “research report.” In particular, this means that it is not intended, nor does it contain sufficient information, to make a recommendation as to the advisability of investment in, or the value of, any security.

Additionally, this article does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation of any offer to buy, or any recommendation with respect to, any securities. You should not base any investment decision on this article; any investment involves risks, including the risk of loss, and you should not invest without speaking to a financial advisor.

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DC Discusses: Professional education continues to attract interest

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