EQT Partners, Neuberger Berman and CPP Investments formed a consortium in October 2024 to acquire Nord Anglia Education, an international private school operator based in the UK. The deal follows a period of consistent M&A activity in the private education sector, which has become a target industry for investment firms following its ability to withstand periods of downturns. This article gives an overview of the deal and tries to highlight the pros and cons of investing in the private education sector.
Nord Anglia Education: Overview and Key Financials
Nord Anglia Education (“NAE”) (“The Company”) is an international private school operator headquartered in the United Kingdom. The Company was founded in 1972 by Kevin McNeany in England, initially offering learning services such as English-as-a-foreign-language classes. The company grew during the 1980s by opening full-scale nurseries and kindergartens and, in 1992, NAE opened its first international school, the British School of Warsaw. In the 2000s, the company began a strategic focus on premium international schools, with rapid growth in Asia, the Americas, China and across Europe and the Middle East.
Figure 1: Distribution of schools managed by Nord Anglia Education
Nowadays, Nord Anglia Education operates 80+ premium international schools across 33 countries, educating 85,000+ students from 2 to 18 years of age. The organization has a total capacity of more than 93,400 school places and 13,000+ employees, including teacher and support staff, globally.
Table 1: Income Statement of Nord Anglia Education
Source: FactSet
Source: FactSet
Nord Anglia Education generates the majority of its revenue from tuition fees, which in top- tier schools like Nord Anglia International School New York can reach up to $52,750 annually. This tuition-driven model is enhanced by auxiliary revenue streams from services such as boarding, uniforms, and extracurriculars, which collectively contribute to strong revenue growth and operating margins.
Table 2: Key Profitability Ratios of Nord Anglia Education
Source: FactSet
Source: FactSet
Revenue has shown steady growth over the last three years, increasing from $1.0bn in 2021 to
$1.4bn in 2023. The year-over-year growth rate, while not exceptionally high, has been positive. It was 1.33% in 2021, rose to 10.38% in 2022, and further to 13.85% in 2023. The most important development, however, is the increase in the operating margins, indicating better control over operating expenses relative to revenue, through improved operational efficiency and cost management.
Net Income has been volatile. It was -$24.8bn in 2021, worsened to -$58.6bn in 2022, but then rebounded to $47.2bn in 2023. The strong recovery in 2023, which shows positive net income after two years of losses, indicates a possible turnaround in profitability. In particular, The Company has struggled over the years with the enormous amount of interest expense arising from its highly levered capital structure.
On the 26th of January 2023, Nord Anglia Education further raised about $2.2bn in the form of two term loans worth $1.5bn and $610mn maturing in 2028, with the aim of refinancing existing debt due this year.
Table 3: Key Solvency Ratios of Nord Anglia Education
Source: FactSet
Source: FactSet
Nord Anglia Education’s initial public offering took place on the 26th of March 2014, on the NYSE, but three years later, in April 2017, it was taken back into private ownership after a deal signed by the Canada Pension Plan Investment Board and Baring Private Equity Asia.
While the growth under private equity ownership has also been substantial, scaling from six schools in 2008 to nearly 100 schools today, concerns have been raised over its debt obligations.
Education Sector and Investors’ Overview
The education sector exhibits substantial growth potential. According to Morgan Stanley, the global education market capitalization is projected to increase from $6.0tn in 2022 to $8.0tn by 2030. Within it, the private K-12 education sector, which includes primary and secondary schooling, covering kindergarten through 12th grade, is estimated to reach $12.7bn by 2030.
This anticipated expansion is a primary reason behind the recent enthusiasm from private markets towards the sector, further enhanced by the transformative effects of technology and by the industry's highly fragmented landscape. Investors are also attracted to education assets due to their countercyclical nature, which allows them to perform robustly during both economic booms and downturns.
Leading players in the global private education market include companies such as Bright Horizons Family Solutions, Nord Anglia Education, and Cognita Schools. These companies leverage online education, specialized curricula, and premium facilities to appeal to upper- middle-class families seeking alternatives to traditional public systems. EdTech providers, including K12 Inc. and Pearson, are also gaining traction as hybrid and fully online learning models become more popular in the aftermath of the Covid-19 pandemic. In emerging economies, smaller regional players are increasingly popular due to their affordability and localized learning solutions. Nonetheless, concerns about the long-term sustainability of educational assets have grown due to declining birth rates in developed countries, the main location of this business. At the same time, public controversies, such as Antin Infrastructure Partners' failure to address abuse at its Hesley schools and subsequent divestment from the asset, have intensified scrutiny on the involvement of private equity in the education sector moving forward.
The sector’s strong appeal is underscored by the consortium formed by EQT Partners, Canada Pension Plan Investment Board, and Neuberger Berman to acquire Nord Anglia Education for around $14.5bn in October 2024.
The “new entry” is Neuberger Berman, an employee-owned investment management firm headquartered in New York City, specializing in private equity, fixed income, and alternative investments. The investment represents the first attempt to exploit the positive trend in the private education sector in the history of the firm.
A different scenario for CPP Investments (Canada Pension Plan Investment Board), based in Toronto, which focus is to invests in various asset classes, including private capital and infrastructure, to ensure sustainable long-term returns for Canada's pension fund. The company had already entered the capital of Nord Anglia Education in 2017, alongside Baring Private Equity Asia, when it was valued at $5.9bn, marking CPP's first direct equity investment in the private education sector.
EQT Partners is a private equity firm based in Stockholm, focusing on investments in technology, healthcare, and other growth sectors across Europe and North America.
EQT initially invested in Nord Anglia Education in 2008 when the company operated just six schools. With EQT's capital and strategic support, NAE significantly expanded its presence globally, reaching over 80 schools across multiple continents. In 2017, EQT reinforced its commitment by increasing its stake in The Company, supporting further growth and operational improvements. Nord Anglia Education is not EQT’s only exposure to education; the asset manager has a long history in the sector, with existing assets including Codemao, EC Council, ILA Vietnam, VUS English Centers, Wall Street English, IMG Academy, and Universidad Europea, the latter acquired earlier this year from Permira.
Concerns about the initial exit strategy for Nord Anglia Education have arisen, especially in light of Long Spring's disappointing IPO. The weakened IPO market has likely influenced EQT's choice to form a consortium and reinforce private investments, avoiding the risks associated with an unimpressive entry into the stock market. Overall, the situation highlights a trend where private equity firms are increasingly taking public education companies private.
Evolution under EQT from the Beginning Onwards
EQT's initial investment in Nord Anglia Education in 2008 marked the beginning of a transformative journey for the international schools operator. At that time, NAE operated 15 schools across Europe and Asia. Under EQT's stewardship, the company expanded its global footprint significantly, growing to over 80 schools in 33 countries by 2024, educating more than 85,000 students aged 2 to 18.
A crucial moment in this evolution was Nord Anglia Education's initial public offering (IPO) on the New York Stock Exchange in 2014, which raised approximately $304mn. This move provided the capital necessary for further expansion and strategic acquisitions. In 2017, EQT, in partnership with the Canada Pension Plan Investment Board (CPPIB), took NAE private again in a deal valued at $4.3bn, underscoring their commitment to the company's long-term growth.
Throughout EQT's ownership, Nord Anglia Education pursued a strategy of both organic growth and strategic acquisitions. The company formed partnerships with prestigious institutions such as the Massachusetts Institute of Technology (“MIT”), The Juilliard School, and UNICEF, enhancing its educational offerings and global reputation. These collaborations contributed to a 98% student retention rate, reflecting high levels of satisfaction and educational outcomes.
EQT's reinvestment in Nord Anglia Education through the 2024 consortium deal, alongside Neuberger Berman and CPPIB, demonstrates continued confidence in the company's growth trajectory. This transaction values The Company at $14.5bn, highlighting its significant appreciation under EQT's guidance.
Recent M&A Activity in the Private Education Sector
The private education sector has experienced robust M&A activity in recent years, driven by factors such as increasing demand for quality education, market fragmentation, and the sector's resilience to economic cycles. In 2021, global private equity deal activity in education reached $27.4bn, with the U.S. accounting for $17.1bn. Although there was a decline in 2023, with global activity at $13.8bn and U.S. activity at $6.4bn, the sector remained attractive to investors.
EQT has been an active participant in this landscape. Notably, EQT exited investments like AcadeMedia and Long Spring Education Group through public offering.
The recent consortium acquisition of Nord Anglia Education for $14.5bn, involving EQT, Neuberger Berman, and CPPIB, is among the largest deals in the education sector to date. This transaction underscores the sustained interest in education assets, particularly those with global reach.
Overall, the private education sector continues to attract significant investment, with M&A activity reflecting confidence in the sector's long-term growth potential and its ability to deliver stable returns.
Deal structure
EQT had been looking for a potential exit for Nord Anglia Education since February. Along with CPPIB, they hired Goldman Sachs, JPMorgan, and Morgan Stanley to advise them as they explored strategic options including a sale or IPO (potentially on the NYSE), seeking a valuation of around $15.0bn. In September, NAE’s owners were in talks with investors, including Neuberger Berman, to inject at least $5.0bn of capital into the international school operator, with EQT set to reinvest through a different fund.
Finally, in October, EQT, Neuberger and CPPIB formed a consortium to take ownership of the company for $14.5bn, with an estimated $10.0bn equity component. EQT opted for this structure after also considering offers from rival buyout firms, which didn’t meet expectations. EQT is maintaining its stake through a new investment from BPEA Private Equity Fund VIII, while CPPIB will make a reinvestment.
The structure differs from EQT’s typical strategy, which focuses on managing education- related companies and taking them public. EQT recently exited four education assets: AcadeMedia, Long Spring Education Group, itslearning, and Touhula. Out of those, half went public: in 2016, AcadeMedia successfully IPO'd on the Nasdaq Stockholm; in 2021, Long Spring became First High School Education (FHSE) group on the NYSE. However, Long Spring’s IPO was disappointing, with its shares closing 12% below its IPO of $10. Additionally, the trend recently for private equity companies has been to take public education companies private and not the other way around. This, combined with a softened IPO market, may explain why EQT chose to maintain its private investment by creating a consortium rather than risk an IPO below expectations.
Although going public may boost brand credibility and allow for easier access to funding for M&A, often K-12 companies that are doing well get dragged down by poor-performing stocks in education, largely because the market is driven by ETFs. Additionally, public investors are not always familiar with the K-12 market and can have less tolerance for the long sales cycle in the industry, according to Ernesto Pagano, partner at BCG. Staying private gives Nord Anglia Education access to the dealmaking expertise available at EQT, which has a portfolio of other similar organizations.
For these reasons, EQT ultimately opted for a sort of “private IPO”, selling the shares to preselected investors and institutions rather than the usual listing on a public exchange. Moreover, the deal allows EQT and other Nord Anglia Education investors to realize a portion of their investment while betting on the business’s growth by retaining control.
Deal Rationale
The investment will allow Neuberger Berman, EQT, and CPPIB to support Nord Anglia Education’s continued growth through both organic and inorganic strategies. Additionally, partnering with EQT will allow Neuberger to benefit from the firm’s deep industry expertise and proven collaboration with NAE’s management since 2008. The deal would offer a consistent source of income, because of relatively steady school demand, as well as exposure to growth in the business from its expansion into new markets. CPPIB’s reinvestment will allow it to remain committed to Nord Anglia Education while delivering an “attractive return” to the CPP fund (as per its press release, 21st October 2024).
Continued growth
Investing in Nord Anglia Education gives the consortium exposure to the continued growth in the education sector, K-12 in particular. The demand for private education continues to grow, particularly in emerging markets, where it is driven by population growth. The share of students enrolled in private schools globally has increased from around 14% in 2000 to 19% in 2019. The K-12 education is the largest and fastest-growing segment within the education sector, as it is expected to reach $4.3tn in spending by 2030, or roughly 4% annual growth from 2022, to claim 54% of total education spending.
Countercyclical nature & stable cash flows
Additionally, private equity firms are attracted to the countercyclical nature of education assets. NAE’s resilient business model has withstood economic shocks including the 2008 financial crisis and Covid-19 pandemic, while also performing well during boom times.
As with most K-12 companies, The Company’s business model is characterized by recurring revenues, which makes it especially appealing to private equity firms. Nord Anglia Education provides stable cash flows thanks to its track-record of high average student tenure and a retention rate of 98%.
Global market leadership
NAE’s global market leadership provides significant scale benefits, which allows it to attract the top teaching talent, receiving over 60 applications for each teaching vacancy, as well as form strategic partnerships with prestigious institutions such as MIT, The Juilliard School, and UNICEF to further distinguish its offering. Nord Anglia Education’s global reputation and high quality of education also enable it to charge premium fees.
Fragmentation & scalability
Furthermore, the highly fragmented nature of the global premium K-12 market, of which single-site operators comprise more than 85%, presents significant opportunities to grow the network. The Nord Anglia Education brand can be scaled across different markets, replicating its successful model in new regions. This scalability creates opportunities for geographic expansion, a key driver of value creation.
Experienced management
Finally, the consortium will benefit from an experienced management team that has been with Nord Anglia Education on average for over a decade and led a period of significant growth.
The investment will allow Neuberger Berman, EQT, and CPPIB to support Nord Anglia Education’s continued growth through both organic and inorganic strategies. Additionally, partnering with EQT will allow Neuberger to benefit from the firm’s deep industry expertise and proven collaboration with NAE’s management since 2008. The deal would offer a consistent source of income, because of relatively steady school demand, as well as exposure to growth in the business from its expansion into new markets. CPPIB’s reinvestment will allow it to remain committed to Nord Anglia Education while delivering an “attractive return” to the CPP fund (as per its press release, 21st October 2024).
Continued growth
Investing in Nord Anglia Education gives the consortium exposure to the continued growth in the education sector, K-12 in particular. The demand for private education continues to grow, particularly in emerging markets, where it is driven by population growth. The share of students enrolled in private schools globally has increased from around 14% in 2000 to 19% in 2019. The K-12 education is the largest and fastest-growing segment within the education sector, as it is expected to reach $4.3tn in spending by 2030, or roughly 4% annual growth from 2022, to claim 54% of total education spending.
Countercyclical nature & stable cash flows
Additionally, private equity firms are attracted to the countercyclical nature of education assets. NAE’s resilient business model has withstood economic shocks including the 2008 financial crisis and Covid-19 pandemic, while also performing well during boom times.
As with most K-12 companies, The Company’s business model is characterized by recurring revenues, which makes it especially appealing to private equity firms. Nord Anglia Education provides stable cash flows thanks to its track-record of high average student tenure and a retention rate of 98%.
Global market leadership
NAE’s global market leadership provides significant scale benefits, which allows it to attract the top teaching talent, receiving over 60 applications for each teaching vacancy, as well as form strategic partnerships with prestigious institutions such as MIT, The Juilliard School, and UNICEF to further distinguish its offering. Nord Anglia Education’s global reputation and high quality of education also enable it to charge premium fees.
Fragmentation & scalability
Furthermore, the highly fragmented nature of the global premium K-12 market, of which single-site operators comprise more than 85%, presents significant opportunities to grow the network. The Nord Anglia Education brand can be scaled across different markets, replicating its successful model in new regions. This scalability creates opportunities for geographic expansion, a key driver of value creation.
Experienced management
Finally, the consortium will benefit from an experienced management team that has been with Nord Anglia Education on average for over a decade and led a period of significant growth.
Advisors and Deal Closing
The deal is currently pending and is subject to customary regulatory approvals.Goldman Sachs, J.P. Morgan, and Morgan Stanley are serving as lead financial advisors to Nord Anglia Education, Lazard is serving as private capital advisor to Nord Anglia Education, and Deutsche Bank and HSBC are serving as financial advisors to The Company.
The deal is currently pending and is subject to customary regulatory approvals.Goldman Sachs, J.P. Morgan, and Morgan Stanley are serving as lead financial advisors to Nord Anglia Education, Lazard is serving as private capital advisor to Nord Anglia Education, and Deutsche Bank and HSBC are serving as financial advisors to The Company.
Comparables Analysis
Neuberger Berman acquisition of Nord Anglia Education represents one of the largest investments in education of the last years, highlighting the increased amount of committed, but unallocated capital private equity companies hold after a dry 2023 and the increased returns in the education sector.
Image 2: Key Competitors of Nord Anglia Education
When looking at similar public companies, excluding those whose main activities are online courses, the two major players are Bright Scholar Education and TAL Education Group, the latter having serious profitability issues over the last years. Comparing Nord Anglia Education and Bright Scholar Education key financial multiples, Enterprise Value/EBITDA and Enterprise Value/EBIT, there is a significant difference. A part of this can be attributed to the controlled premium built in the acquisition but also incorporates investors’ attitudes towards the two companies. NAE benefits from a strong brand recognition and a well-diversified portfolio of schools in over 30 countries, having thus more stability and more optimistic growth potential than its counterpart which operates only in China.
When it comes to selected precedent transactions, including the acquisitions of Cognita Schools Group, GEMS Education and Apollo Education Group, Nord Anglia Education continues to show a higher valuation, although by a smaller margin. Even if in this case the competitors have presence in Europe and Americas, their size is significantly smaller, with Enterprise Values below $1.5bn. Therefore, Nord Anglia Education’s position as a leader in the private schools sector and its size give Neuberger Berman the advantages of lower risk and strong client network when entering the education sector.
Image 3: Online Education Providers compared to Nord Anglia Education
Although valued higher than other private schools operators, Nord Anglia Education still lags behind the online education companies, such as Scholar Education Group and Stride. Given their nature, being accessible all over the world at a significant lower cost, investors perceive more growth potential for them as technology continues to further develop. Consequently, even if the demand for private education offering International Baccalaureate or A-Levels qualifications has soared in the past years, investors still do not consider them as attractive as online education platforms offering various courses and standardized tests preparations, due to their cost and accessibility.
Conclusions
Taking all these aspects into account, the acquisition of Nord Anglia Education underscores a growing trend of private equity investment in the education sector, especially as demand for private international schools rises. The market still attributes more growth potential to online education providers, and this can potentially be also a growth opportunity for companies such as NAE. With its premium brand, diversified global presence, and stable growth prospects, Nord Anglia Education stands as a leader among private school operators. The education sector’s countercyclical nature and fragmented market offer significant investment opportunities, appealing to investors despite challenges like declining birth rates and market scrutiny. This acquisition reflects a strategic shift towards private capital in education amid a complex IPO environment.
By Victor Blanc, Caterina Molinari, Laurian David Pop, Andrea Cavenago
Sources:
- FactSet
- S&P Capital IQ
- Nord Anglia Education website
- Value Add
- EQT Group website
- Reuters
- Orbis
- White & Case
- WSJ
- Financial Times
- Bloomberg