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Investment Trends in Post Secondary Education Market Analysis

Explore investment trends in the post secondary education market, including buyer preferences, market challenges, and growth opportunities. Understand the industry dynamics and potential for financial returns in small to medium-sized companies. Key insights from industry experts and market analysis are provided.

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Investment Trends in Post Secondary Education Market Analysis

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  1. Introduction • The Industry Now and What Our Buyers Like Tom Flaherty,Kuhn Capital/The Roundstone Group • Trends in Business Services Amy LaBan, Lake Capital • Trends in Software Howard Smith,First Analysis • Trends in Transaction Processing Franco Turrinelli, William Blair Kuhn Capital + The Roundstone Group

  2. M&A Today The Tech, Information and Business Services Terrain Now and Next Panel February 12, 2004 Kuhn Capital + The Roundstone Group

  3. Overview • Who Are Our Buyers? • What Do Our Buyers Like? • The Dilemma • What To Do? • The Market Now • What Industries Do Our Buyers Like? Kuhn Capital + The Roundstone Group

  4. Who Are Our Buyers? • Private equity firms seeking platform companies • Portfolio companies seeking add-on acquisitions Kuhn Capital + The Roundstone Group

  5. What Do Our Buyers Like? • Recurring revenue streams • $50 million or more in revenue (platform) • Leveragable technology or low cost resources • Moderate to high growth • Strong management • Good cash flow/EBITDA margins • Ability to use financial leverage • Valuation (5x or 6x EBIDTA) • for the right platform will consider up to 10x EBIDTA Kuhn Capital + The Roundstone Group

  6. The Dilemma • In today’s market, these companies are few and far between at reasonable prices Kuhn Capital + The Roundstone Group

  7. The Market Now • Public valuations in certain sectors are currently high (Transaction Processing, Post Secondary Education, Offshore - India) • Vast amount of available private equity • Large private equity firms with substantial capital need to do larger deals • Private equity firms have difficulty competing with strategic buyers on valuations • Relatively better opportunity for financial returns in small to medium sized companies Kuhn Capital + The Roundstone Group

  8. What To Do? • Be disciplined • Look to small to medium sized companies where valuations are more reasonable • Consider turnaround situations • Assume greater operational risk Kuhn Capital + The Roundstone Group

  9. What Industries Do Our Buyers Like? • Transaction Processing • Insurance BPO Outsourcing • Offshore (IT and BPO Outsourcing) • Post Secondary Education Kuhn Capital + The Roundstone Group

  10. Why Post Secondary Education Market? • Large, fragmented market • Good demographics • Barriers to entry - accreditation, Title IV regulations • Solid economics - pricing, margins, and government student loans • Valuation high for large public companies but still reasonable for smaller private companies • Opportunities to create shareholder value Kuhn Capital + The Roundstone Group

  11. Total Expenditure • Post Secondary education market is greater than $260 billion, accounted for 2.8% of GDP in 2000. Source: US Department of Education; LEGG MASON: Industry Analysis Summer 2003 Kuhn Capital + The Roundstone Group

  12. Enrollment • Fall enrollment increased from 12.1 million students in 1980 to 15.3 million in 2000, and is projected to reach 18.2 million through 2012 Kuhn Capital + The Roundstone Group Source: National Center for Education Statistics: Digest of Education Statistics, 2002.

  13. Market Players • During the 2001–02 academic year, there were 6,458 Title IV participating institutions in the US, of which 37% (2,418) were for-profit private institutions Source: National Center For Education Statistics, Post Secondary Institutions in the United States: Fall 2001 and Degrees and Other Awards Conferred: 2000–01. Kuhn Capital + The Roundstone Group

  14. Tuition Pricing • College tuition and fees have increased over the last 23 years at a CAGR of 7.1% for private four-year institutions, and a CAGR of 6.4% for public four-year institutions Source: Education Commission of the States, Trends in College Pricing 2003 Kuhn Capital + The Roundstone Group

  15. Major Players Kuhn Capital + The Roundstone Group Source: Corporate reports

  16. Corporate Valuation Kuhn Capital + The Roundstone Group Source: Corporate reports and The Roundstone Group estimations

  17. Private Equity Groups Kuhn Capital + The Roundstone Group Source: Corporate Reports

  18. Private Equity Groups Kuhn Capital + The Roundstone Group Source: Corporate Reports

  19. M&A Activities Kuhn Capital + The Roundstone Group Source: Corporate reports

  20. Selected Transactions Kuhn Capital + The Roundstone Group Source: Corporate reports and The Roundstone Group estimations

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