return icon Vietnamnet.vn

Education funding reaches fever pitch

The past year was a very exciting period for the educational investment market, showcased not only through direct capital but also via mergers and acquisitions deals carried out by financiers.

education funding reaches fever pitch
Education is vital at a time when improving workforce quality is of most importance 

 


Education is a new area sector for Navis, having mainly placed capital into consumer goods, industry, and retail services.

In Vietnam, Navis has poured money into Go Dang JSC, OPV Pharmaceuticals, and is investing in Hanoi French Hospital.

The latest mergers and acquisitions (M&A) deal in education involves Navis Capital Partners, a Malaysia-based fund managing a $5 billion portfolio focused in Asia.

Navis completed investment in Thanh Thanh Cong Education JSC (TTCE), a high-quality Vietnamese private education provider operating in the south of Vietnam.

The investment value has yet to be disclosed.

TTCE is one of the biggest private school chain established in 2007. It currently owns and operates 17 schools and English training centres, and has identified and secured land for an additional four schools which will open for the 2020/2021 academic year.

Navis and its partners will continue to grow the platform by opening new schools in underserved areas and expanding services in both new and existing schools.

Another remarkable M&A deal is the acquisition of Hoa Sen University by Nguyen Hoang Group.

The deal value was not disclosed but to become the largest shareholder of a famous brand like Hoa Sen, some investors may be able to visualise somewhat the value of such a deal.

The scale of Nguyen Hoang’s activities is large, with more than 40 projects and 50,000 students.

Besides Hoa Sen, the group also owns Hong Bang International University, Gia Dinh University, and Ba Ria–Vung Tau University.

Last year, Nguyen Hoang founded an international education city (IEC) in the central province of Quang Ngai. With the total investment of VND1 trillion ($43.47 million) and an area of 10 hectares, the IEC project is expected to become a stepping stone to entering and conquering the central market for the group.

The educational investment also attracts overseas financial institutions. Mekong Capital announced that Mekong Enterprise Fund III, Ltd. invested $4.9 million into YOLA Education JSC for a minority stake. YOLA is the sixth investment announced by Mekong Enterprise Fund III.

Elsewhere, Swedish private equity firm EQT Capital Partners, through its subsidiary EQT Mid Market, has poured an undisclosed amount into English learning company ILA Vietnam.

IFC and Aureos Fund invested $10 million in Vietnam USA Society English Centers, and TAEL Partners injected $10 million in IvyPrep Education.

Meanwhile, TPG Capital has reached an agreement to become a major shareholder of Vietnam Australian International School (VAS).

As part of this deal, two of VAS’ existing shareholders, Mekong Capital and Maj Invest, have fully divested their holdings.

Lucrative market

Observing increasing interest in education from both local and international investors, Kenneth Atkinson, executive chairman of Grant Thornton Vietnam Ltd., told VIR that such a trend is consistent with the company’s private equity survey this year in which 35.4 per cent of respondents selected education as the second-most attractive sector over the next 12 months in Vietnam.

“There are two main factors driving this growth. First, the increase of the middle-income class in Vietnam. The middle class is expected to see an increase from 12 million people in 2014 to 33 million in 2020,” Atkinson said.

“The average income per capita in Vietnam is expected to increase from $1,400 in 2014 to $3,400 over the next few years, while the family size is shrinking. Of course, the average per capita income is considerably higher in the major cities and exceeds $5000 in Hanoi and Ho Chi Minh City.”

According to Atkinson, the second factor is that the rise in the number of public schools has not been in line with increase of population. Moreover, parents want to equip their children with more soft skills that are not offered in public schools. The private sector has stepped in to meet this demand.

“The reason why education has become a potential segment for M&A activities is quite easy to see,” Atkinson continued. “The potential market size for education is enormous due to the big supply and demand gap.”

Legislative changes drive M&A

Nguyen Lan Phuong, partner at Baker McKenzie Vietnam, told VIR that Vietnam’s educational market is very promising and active. Vietnam’s World Trade Organization commitments in the educational sector, together with the domestic education-related laws and decrees, such as Decree No.86/2018/ND-CP on foreign co-operation and investment in education, have laid a foundation to bring in foreign investors.

Based on statistics by the Ministry of Education and Training, overseas funders have invested in the entire range of education service areas from K-12, vocational, and collegiate education, to language centres and education technology.

While establishment of institutions are subject to many requirements, such as legal licences and permits, and operational requirements like per student capital and minimum teaching experience, M&A is the chosen path for ­investors to approach the market.

“We have observed a lot of interest from industry players and private equity funds with a focus on education,” Phuong noted.

“We have seen foreign financiers that want to invest in minority ownership first to test out the market, and we have also seen a number of players that have made substantial investment in education institutions.”

In addition to and in preparation for foreign M&A investment into Vietnam in the education sector, Baker McKenzie has also observed the recurring trend of local market consolidations amongst prominent private-sector educational groups.

“We think with Decree 86, together with its lifted restrictions in enrolment cap of foreign-invested K-12 institutions, Vietnam’s educational sector has become even more of an attraction,” Phuong said.

“Furthermore, with the 94-million people population and a young demographic profile, the appeal of the educational sector is a given. Last but not least, the Vietnamese economy is switching from primary labour-intensive manufacturing to more services. So the educational sector is front and centre as the need to upgrade the capacity of the workforce becomes more urgent.”

Favourite targets are English language training schools, and international schools with high revenue and famous brands.

Long-term investors are willing to bet on domestically-owned brands that have an aggressive development plan, and are able to expand the network quickly.

Challenges to overcome

According to Atkinson of Grant Thornton, the biggest market segment is mass, upper mass, and affluent mass, both in the area of English language training schools and K-12 schools, depending on the funding strategy of the investors.

“The K-12 system with stable customers and revenue model is always attractive, while the demand for English training schools has always been high, and requires less capital expenditure to develop,” he said.

However, none of the investment segments contain zero challenges. The first obstacle in the segment is the shortage of attractive opportunities at a size suitable for foreign buyers.

The competition for deals has been high, and this is also reported to be one of the biggest challenges, according to investors in Grant Thornton’s 2019 private equity survey.

“Licensing may be quoted by the public as a challenge for foreign investors in the educational section but this is not significant, and procedures have been changing in a way that is more supportive for foreign investors, especially the change in the number of local students allowed in foreign invested schools,” Atkinson added.

“On top of that, the common challenges for private equity investments are also relevant, such as the valuation gap between buyers and sellers, and the expectation gap in terms of transparency or corporate governance.” VIR

Van Thu

Vietnam’s tertiary education goes international

Vietnam’s tertiary education goes international

Internationalization of higher education is considered a solution to improve training quality, catch up with the regional and international development, and upgrade the quality of human resources.

What does Vietnam’s education system need?

What does Vietnam’s education system need?

Is it difficult to start a business in the education sector in Vietnam?

Autonomy is not freedom in tertiary education

Autonomy is not freedom in tertiary education

Nguyen Thi Kim Phung, director general of the Department of Tertiary Education, Ministry of Education and Training, talks to Nhân Dân (People) newspaper on the areas that universities and other education institutions should be given autonomy.

MORE NEWS

Glass-walking bridge in Moc Chau wins Guinness world record

The Guinness World Records has announced that the Bach Long (White Dragon) glass walking bridge in Vietnam's northern province of Son La is the world's longest glass-bottomed bridge.

High costs and legal impasses hinder LNG energy development in Vietnam

Too many variables and over-reliance on imports have been hindering Viet Nam's plan to build power plants running on liquefied natural gas (LNG), industry experts have said.

Three Vietnamese military officers awarded UNHQ medal

The United Nations on May 26 awarded its medal to three officers of the Vietnam People’s Army who are working at this organization’s headquarters in New York, USA, on Peacekeeper’s Day (May 29).

Trade revenue set to eclipse 700 billion USD this year

Free trade agreements (FTAs) spurred Vietnam’s bilateral and multilateral trade, with 2022 revenues projected to hit a record 750 billion USD, according to experts.

Government takes action to protect wild birds

Deputy Prime Minister Le Van Thanh has signed a directive to protect migratory and wild birds in Vietnam.

Quang Nam man owns 2,000 antique gardening tools

Collecting old items is how 47-year-old Tran Van Phuc from Quang Nam province describes the previous daily life of the working class to the younger generation.

Tourism booms as people are anxious to travel after Covid lockdowns

Since March, many families have booked long-distance tours for the summer now that the economy has reopened.

Mekong Delta farmers back away from rice as input costs rise

Rice farmers in many Mekong Delta provinces are reducing rice cultivation over rising prices of inputs like fertilisersnbsp;and pesticides.

Mural depicting VN, US’s friendship inaugurated

A ceramic mural, US-VN Friendship, has been inaugurated at the new US-Vietnam Co-operation Centre in Hanoi.

New pact promotes Vietnam-Europe fashion links

Culture, lifestyle and fashion links between Vietnam and Europe will be promoted under a Memorandum of Understanding signed this week by the European Chamber of Commerce in Vietnam (EuroCham Vietnam) and the Aquafina Vietnam International Week.

Vietnam likely to consider nuclear power development

The Economic Committee of the National Assembly (NA) has recently proposed developing nuclear power over the next decades to ensure national energy security and meet the ‘net zero’ goal Vietnam set at the 26th UN Conference on Climate Change (COP26).

Short animated Vietnamese film competes at Cannes Film Festival

“Giac Mo Goi Cuon”, known as “Spring Roll Dream” in English, a short animated film by a young Vietnamese director has been nominated in the La Cinef, a category at the Cannes Film Festival which honours works by students from global film schools.

PM welcomes Intel’s investment expansion in Vietnam

Prime Minister Pham Minh Chinh applauded Intel’s decision to expand its investment in Vietnam while receiving its CEO Patrick Gelsinger in Hanoi on May 27.

Hanoi to build 17 bridges spanning Red River

In addition to the seven existing bridges, Hanoi will have 10 more bridge crossing the Red River, under a development plan to 2030 with a vision towards 2050.

Localities asked to report progress of large FDI projects

The Ministry of Planning and Investment has requested localities to report the execution of large foreign direct investment (FDI) projects that need significant investment and use large land lots.
back_to_top