Education: 2021 Deal Round-up

and Trends to Watch Out For in

2022

April 2022

These materials are intended to supplement a discussion with L.E.K. Consulting.

The contents of the materials are confidential and subject to obligations of non-
disclosure. Your attention is drawn to the full disclaimer contained in this document.
Average deal value has stabilized since 2018, but number of deals has increased sharply

Number of deals1 in education sector

(2015-21)

500
415
400

300 277 285

218
200 188
158
137
100

0
2015 2016 2017 2018 2019 2020 2021

Average deal value2 (in

116 127 145 210 155 226 202
millions USD)

Number of deals with

78 85 101 103 94 148 157
disclosed value
1Dealincludes deals without disclosed deal value
2Onlydisclosed deal values have been considered for the analysis
Source: Mergermarket, L.E.K. research and analysis
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Key themes in the education sector

1. Investments into education have continued to grow during 2020-21 despite the impact on incomes, with spending in 2020 alone
Highly defensible being more than double that of 2019
1
sector 2. Number of deals doubled since 2019, indicating a shared sentiment amongst investors about the attractiveness and reliability of
education assets

Adoption of digital is 1. An estimated 50% of investments in the education industry has been towards edtech
2
transforming the industry 2. Key sub-segments like tutoring and test prep, and corporate trainings have seen the highest rate of digital adoption in 2020-21

Broad appeal among 1. As investors take into account the threat of digital disruption and the short-term exposure due to COVID-19, the education sector
3
different investor types does still provide attractive investment opportunities in the short-term and the long run

1. The core education sectors (K-12, HE, etc) are highly fragmented, as the top 10 international school groups account for <20% of
the total international K-12 market
4 Room for consolidation
2. Newer sectors like edtech are equally fragmented, with established incumbents being constantly disrupted by start-ups
mushrooming across regions

Source: L.E.K. research and analysis

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Investment in education reached record levels during COVID-19 despite slowdown in investments in
Asia (China)

Global education deals1 by year and region

(2015-21)
USD China regulatory impact
Investor sentiment in China
35 33.5B $8B-10B decreased dramatically, with 2021
31.8B recording $8B drop in investments
North America
30
Asia
Australia
25
Europe North America contribution
21.6B Education investment accelerated
South America
20
Africa
40% in North America during COVID-19
years through tech and non-tech
15.4B sectors
14.6B
15

10.8B
10 9.1B
India on a tear
India accounted for ~17% of total
education investment in 2021, a
5
4X 4X increase over its share of 4%
in 2018, indicating diversification
0 of investments
2015 2016 2017 2018 2019 2020 2021
China and India account for the most investments in Asia;
investments in India have increased while China has seen a decline
1. India went from $0.9B in 2018 to $5.6B in 2021
2. China decreased from $7.7B in 2018, to $2.1B in 2021
1Onlydisclosed deal values have been considered for the analysis
Source: Mergermarket data, L.E.K. research and analysis

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There has been a significant increase in “mega deals” (>$500M) over the past few years

Distribution of education investment by deal size1

(2015-19E) <$50M
USD (No. of deals) $50M-$200M
$200M-$500M
~9.1B ~10.8B ~14.6B ~21.6B ~14.6B ~33.5B ~31.8B $500M-$1B
100 ~0.8B ~1.0B ~1.0B ~0.9B
~1.1B ~1.5B (70) ~1.2B (72)
(42) (50) (55) ~0.9B (55)
(53) >$1B
(12)
~0.5B ~0.6B ~1.0B ~1.0B ~5.1B ~5.9B
(7) (13) (14)
(9)
(44) (47)
80 ~5.5B
(26) ~5.9B
~4.4B ~4.6B
~4.4B (25) (20) (18) ~7.8B
(20) (24)
60 ~5.4B ~4.0B ~5.7B
(26) (6) (8)
~3.6B
~3.6B ~7.9B
40 (5)
(5) (10)
~3.1B
(5) ~10.2B
~1.2B ~15.4B
20 (4) (8)
(2) ~4.7B ~4.4B ~9.0B
(3) (2) (4)
~1.4B ~1.7B
(1) (1)
0
2015 2016 2017 2018 2019 2020 2021

Share of deals
28% 45% 56% 66% 54% 66% 55%
>$0.5B
1Onlydisclosed deal values have been considered for the analysis
Source: Mergermarket, L.E.K. research and analysis

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Number of deals in education services, corporate training, and test prep and tutoring has increased
over the past few years

Value of deals in education sector

(2015-21) Key trends
USD
35  Investment in core education has
33.5B
decreased due to COVID-19
31.8B

30  Select segments like test prep and

tutoring, corporate training, and adult
training (upskilling) have emerged as
25 favourite sectors targeted by investors
21.6B
20

15.4B
14.6B
15

10.8B
10 9.1B

0
2015 16 17 18 19 20 211

Test prep and tutoring Adult training (upskilling) Early years Higher education Publishing Transnational education
Corporate training English language training K-12 Vocational education Education services Other

Source: Mergermarket, L.E.K. research and analysis

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Emerging markets have seen large investments in direct to consumer supplementary ed (tutoring, test
prep, ELT) besides traditional sectors such as K-12 and HE, for the years 2020 and 2021

Total deal value1 for developed and emerging markets, by subsectors

(2020-21)
Key trends
USD
~25B ~34B  Higher education, a traditional education
100% segment, is comparably large in both emerging
Corporate training and developed markets. Investment was
Adult training (upskilling) largely towards/by platforms (accounting for
Corporate training
80% ~75% investment).
Higher education Adult training (upskilling)  Test prep, tutoring and enrichment (TTE)
accounts for more than half of the emerging
60% K-12 markets’ deal value. The large addressable
Education services
market is driven by the poor quality of
Higher education traditional education and competitive exam
40% systems and culture.
Publishing  Adult training (upskilling) makes up a
TTE significant chunk of the total deal value in
20% Education services developed markets, owing to the growing
demand for professional upskilling and
TTE transferrable skills across industries and
0% increased competition in the domestic job
0% 20% 40% 60% 80% 100% markets.
Developing countries Developed countries

(Brazil, China, India, (Australia, UAE, Japan, Spain, South Korea,

Singapore, Malaysia, Vietnam) Hong Kong, France, US, UK)

1Onlydisclosed deal values have been considered for the analysis

Source: Mergermarket, L.E.K. research and analysis

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6 key themes we continue to be ‘bullish’ about in the education sector

Traditional sectors Education technology & new-age models

1 4

Global emergence of regional K-12 school chains Out-of-school reinforcement ready for disruption by online

2 5

International student enrolment expected

New-skilling, upskilling and reskilling
to rebound

3 6

Online higher education as a disruptor of mass education Technology in K-12 and higher education as an enabler of
institutions individualized learning and improved outcomes

1Dealincludes deals without disclosed deal value

2Onlydisclosed deal values have been considered for the analysis
Source: Mergermarket, L.E.K. research and analysis
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There are multiple global K-12 platforms that have demonstrated scale and are growing rapidly
1 Regional K-12 providers

Name of K-12 institution Geography focus Curriculum offered Price segment

GEMS MENA IB, British, American, National Budget to premium
Nord Anglia Global IB, British Mostly premium+
Mostly mid-priced to super-premium with
Cognita Global IB, British, American, Australian
some presence in budget
Inspired Global IB, British Budget to premium+
SABIS Global Own curriculum Mostly budget
Spring Education US American Budget to premium
ISP Global IB, British, American, Canadian, Vietnamese, Malaysian Mostly mid-priced
Dulwich College Mgmt. Int'l Asia and MENA IB, British and Local (for bilingual schools) Mostly premium
Eleva Brazil Brazilian, IB, Bilingual Budget to premium
Globeducate Europe British Budget to premium
SEB Brazil American, Brazilian Budget to premium
Beacon House India British Mostly budget
Sri Chaitanya India Indian Budget to mid-priced
Ryan Schools India Indian, IB, British, National Budget to mid-priced
Maple Leaf China Chinese, Canadian Budget to premium
Narayana India Indian Mostly budget

Regional K-12 platforms are closely following track and well positioned to break into the global playing field
Source: L.E.K. research; annual financial reports; company websites

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Rebound in global mobility indicating pent-up demand is fuelling growth in UK and US; Australia is
likely to recover soon
2 International student enrolment

International education rebounded in countries with favourable travel policies Demand in Australia likely to rebound
soon
New international student visa approvals by country
Sep’19-Sep’21
Indexed to Sep’19 (=100) Sep’21 vs.
Visa refund to lure back
Sep’19
160 thousands of international
United +50%
Kingdom
students and backpackers
140 - The Sydney Morning Herald
United +30%
States
120
Canada +15%
100
No Border Changes in Australia:
International Students Allowed to
80 Enter Despite COVID-19 Cases

60 - Erudera College News

40
Australia -70% The UK has already met its
20 overseas recruitment target.Time
for another
0
- Times Higher Education
Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21
- (Jan 2022)
Peak COVID-19 restrictions

Source: Mitchell Institute, “Student, interrupted: International education and the pandemic”

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Online education powered by technology (vs distance) is a true disrupter of mass traditional higher
education
3 Online higher education

Online education growing at 5%-6% vs

Student convenience face-to-face declining at 2%-3%
annual CAGR

Lower cost Online education growing at 10+% vs

face-to-face at 3%-5% annual CAGR

Online education growing at 50%+ vs

Individualised learning face-to-face at under 10% annual
CAGR

Better outcomes

Note: Actual revenue numbers may be affected by shift in exchange rates

Source: L.E.K. research; annual financial reports; company Websites

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There is an edtech frenzy in the non-traditional education segments, with ~50% of the total investment
in 2020 and 2021 being centred around technology
4 Online after-school reinforcement

Deals and deal value in the education sector Non-tech Tech

(2020-21)
USD
18.9B 13.5B 12.8B 7.1B 5.9B 3.6B 1.7B 1.7B
100
1.9B
5.2B 0.4B
80 1.3B
0.7B

60
12.1B 6.5B
5.8B
10.9B
40 1.3B
13.8B
2.3B
1.0B

20

1.5B 0.6B
0 0.1B
Test prep Higher education Corporate and adult training Publishing Pre-K Other
and tutoring and vocational and K-12 sectors
Education services Language
learning

Source: Mergermarket, L.E.K. research and analysis

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Online test prep and tutoring’s adoption in developing markets has been increasing, driven by
increasing parents’ acceptance; high preference for blended
4 Online after-school reinforcement

Parents’ willingness to enrol, preferred mode – Demand for online/blended after-school learning across
those enrolled in offline after school tutoring SEA countries
Percentage Percentage
100% 100
5% 7% 4%
Pre-recorded 12%
17% 5% 0%
7 = Definitely classes 12%
would enrol
80% Indifferent ~7% 80 26% 20%
32%
6 30%
33%
60% 60
5
36%
Live online 41%
40% 4 classes in 40 36%
real time
~79% 33% 42%
3

20% 20 24%
2 26%
23%
17%
1 = Definitely would 8% 12%
0% NOT enrol 0
Likelihood to enrol Preferred mode Indonesia Malaysia Philippines Singapore Vietnam

Preferred mode of study

Online Offline

Source: L.E.K./Lucid consumer survey in SEA, 26-30 May 2020 (N=3165); L.E.K. research and analysis

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Huge demand for upskilling globally fuelled by growth in use of technology across sectors
5 New skilling, upskilling, reskilling

Unique confluence of outdated skills and The demand for upskilling will be fulfilled by various types of
new-age skills courses

Micro-credentials Short-courses Bootcamps

Demand in digital skills set to expand 5-fold
over the next 5 years
 Skillshare

Developed markets
 Udacity  Udemy  General Assembly

 FutureLearn  edX  Codesmith

50% of skills of the workforce today set to  Coursera
become outdated in the next 5 years

Developing markets
 UpGrad  Simplilearn  ArcLab

 Great Learning  Conicle  FutureLab

Traditional higher education grappling to
 Topica Uni  Binar Academy  CoderSchool
keep pace with changing skill needs while
being effective for students  HarukaEDU  Indorse  Hacktiv8

Source: WEF, “Why digital upskilling is a crucial part of sustainability”, L.E.K. research and analysis

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Education services continues to grow rapidly in developed nations
6 Education services

Student to computing devices in K-12 schools, US,

Over 70% of educators believe that more
digitalisation is required in the following fields
2000-2015
9
6.6
Student Curriculum
6
3.8 acquisition management
3.1 and retention
3 1.8
0.8
0
2000 2005 2008 2012 2015

~85% K-12 students have access to high-speed internet due to the $3.9
E-rate funding for internet access in public schools and libraries

3 out of 5 teachers said that their use of technology will increase

in the following year Student Student
services employability

Source: L.E.K. research and analysis

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Connect with us

Reach out to us to access a list of scaled edtech assets categorised by latest round of funding and key geographies

Ashwin Assomull
London Wroclaw
Chicago Beijing
Partner, L.E.K. Consulting’s Global Education Practice San
Francisco Boston Paris
Munich Tokyo
a.assomull@lek.com Madrid
New York
Los Angeles
Houston
Mumbai Shanghai

Jitin Sethi
Singapore
São Paulo
Partner, L.E.K. Consulting’s Global Education Practice

j.sethi@lek.com Sydney

Melbourne

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