Navis profits from Pearson’s expansion drive

In the last 18 months, Pearson has also assumed control of Global Education & Technology and TutorVista, test preparation and tuition companies in China and India, respectively.

For Navis Capital Partners, however, Pearson's key acquisitions came in 2009 and 2010. First, it picked the Wall Street Institute's (WSI) China franchise for $145 million. Then it bought WSI outright from private equity owners The Carlyle Group and Citi Private Equity for $92 million, becoming the global franchisor.

"When Pearson acquired WSI they were very clear that they intended to become the operator in high-growth markets," says Jean-Christophe Marti, a partner at Navis. "From that point we knew that they would be a contender for the WSI business in Indonesia."

Last week Pearson did indeed become the new owner of the WSI Indonesia franchise, paying Navis $16.3 million for the asset, which comprises four training centers that serve more than 8,000 students. It is the private equity firm's fifth exit in the last eight months and only the second ever to deliver a return of 10x.

The large multiple is explained by Navis building up WSI Indonesia from scratch. The Malaysia-based private equity firm acquired a 75% interest in the Thailand franchise in 2006, assuming control from two entrepreneurs. One year later, it negotiated with the WSI parent company to take the business into Indonesia, making a greenfield investment of $16.3 million.

An Indonesian entity, Efficient English Services, was set up in conjunction with a local partner, an ex-banker who took about 10% of the business. Navis' approach was based on its experiences in Thailand, and many practices were replicated. The WSI model has three tenets: computer-based training, classroom-based training and social clubs. Marti notes that the social element in young markets like Thailand and Indonesia is more important than in Europe.

Despite these commonalities, markets must be addressed individually, which explains why WSI primarily exists as a set of country franchises. "As a multiple franchisee, there is diversification but little scale because you have to set up all the marketing and systems locally," says Marti. However, he adds that language tuition services are a lucrative market in Asia because the demand to learn English is often unmet by national education systems.

Navis retains WSI Thailand and is introducing two new training centers, taking the total to nine. The business isn't regarded as a likely target for Pearson because the growth potential is limited compared to Indonesia. However, as a portfolio company of Navis Asia Fund IV, which is now approaching the end of its holding period, an exit is expected in due course.

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• Topics
• Southeast Asia
• Consumer
• Buyouts
• Education
• Navis Management
• Indonesia