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Deal Activity In Education Poised For Full Marks In 2010

15 October, 2010

Year 2010 could well be a turning point for deal activity in the sunrise sector of education & education services, a largely fragmented sector with hundreds and possibly thousands of small players. With over two months to go, both private equity (PE) and mergers & acquisitions (M&A) deals have already hit the highest ever in terms of combined deal value.

The total value of M&As in the space led by SKIL Infrastructure’s investment in Everonn Education, one of the biggest ever transactions as yet in the education sector, has crossed $50-million mark for the first time with over half dozen transactions.

The M&A deal numbers for the sector could well touch the previous best of 11 recorded in 2007 when top industry firms Educomp, Manipal Education and Core Projects & Technologies struck multiple deals in both India and abroad.

Expectedly, domestic M&As dominated the deal flow over the last six years with Educomp striking as many as eight transactions, the largest being its $24.5-million deal for Learning.com, followed by stake purchase worth $8.7 million in EuroKids International.

Some other firms or groups who have cut multiple deals include: Manipal Education, Core Projects & Technologies, DMC International (moved from real estate business to education) and Edserv Softsystems.

What is notable is that most of the education sector firms involved in deals are backed by entrepreneurs and very few have any involvement of large business groups, even as some like Zee/Essel group have created a large presence in private sector education.

But that has not affected investment interest from private equity/venture capital groups who get to participate in the company much more than what they could have managed to with a large business family run education company. Although the constraining factor specially for PE firms is the size of the companies (often being too small), dealflow as well as values have risen this year.

With 14 PE/VC deals in the first nine months already, the education sector is certainly one of the upcoming areas for institutional investors banking on the potential for large section of untapped as well as uncorporatised and fragmented sector.

That was reason enough for VCCircle to put together an investment summit focussed entirely on the education space and unravel answers on what makes this sector tick. As is norm, we will have India’s fastest growing education enterprises and profilic investors betting on this theme deliberate on the opportunities and challenges centred around this non-cyclical and recession-proof investment theme. To get a complete picture on raising private capital and growing scale in education, register for the VCCircle Education Investment Summit 2010

Coming back to the deal math, while on the one hand, the number of transactions in a calendar year has already surpassed the previous best of 12 deals worth over $102 million in 2007, in terms of total deal value also, this year has overtaken PE/VC transactions worth over $128 million struck in 2009. 2010 is also the third year out of the last six when the total amount of PE/VC money flow into the sector has crossed $100 million mark.

Even as two sizeable deals worth over $25 million have been struck this year– India Equity Partners investment in IL&FS Education & Services and Premjiinvest Fund’s deal for Manipal Universal Learning– the top two largest PE/VC transaction in the sector were struck in 2006-07. These include IDFC Private Equity’s investment in Manipal Universal Learning and Orient Global Education Fund’s investment in NIIT Ltd.

This shows while PE/VC investment in education sector is gaining traction the investors are still searching for potentially large deals in companies that have gained some scale and size. Investors striking multiple deals over the past 5-6 years include: Sequoia, Times Private Treaties/BCCL, Saif Partners, Matrix Partners, India Build Out Fund, Helix Investments, Helion and Gaja Capital.


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Deal Activity In Education Poised For Full Marks In 2010

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