Permira buys China, Indonesia English tuition business

The size of the deal was not disclosed. Mergermarket, AVCJ’s sister publication, previously reported that the transaction valued the business at $1.5-2 billion, based on EBITDA of around $100 million for the 12 months ended August 2018 and bids of 16-20x EBITDA. Permira entered exclusive negotiations in February, but the process was then said to have been put on hold due to COVID-19.

EF Kids & Teens responded to the pandemic – and subsequent closure of schools – by shifting much of its teaching online. Permira will not only invest in expansion of the school network and development of ongoing academic programs but also support the online platform. This includes the company’s one-to-one and group hybrid learning systems that offer classroom and online elements, according to a statement.

Existing owner EF Education First will retain a minority interest in the business. EF is one of the leading out-of-school English language tuition providers in China, with divisions catering to adults, students wishing to study abroad, and the K-12 age group. The first two divisions are not included in the sale to Permira.

EF was established in 1965 by Swedish college dropout Bertil Hult and it is still controlled by his family. The company, now headquartered in Switzerland, operates more than 600 offices and schools across 50 countries, employing 52,000 people.

“China has emerged as the world’s largest and most advanced markets for educational services, and Permira is a firm believer in the importance of high-quality education powered by technology. This exciting partnership builds on Permira’s successful track record of backing entrepreneurs in Asia and growth investments in education and edtech, with Curriculum Associates and Renaissance Learning in the US and Universidad Europea in Europe,” said Robin Bell-Jones, a partner at Permira.

A similar transaction saw Baring Private Equity Asia and CITIC Capital acquire Wall Street English from Pearson in 2017. The business is global, but China is its single largest market with around 70 centers nationwide.

While the likes of EF and Wall Street English have sought to expand their online offerings, their reliance on brick-and-mortar networks proved challenging during the worst of the pandemic in China. Several companies in the space have reportedly laid off staff and imposed salary cuts. Before COVID-19, one of the largest operators – Web International English, which had 150 centers – collapsed, blaming internal and external pressures.

There are several online-only players in the English language learning space that have seen significant growth – though not necessarily profitability – in recent years. Liulishuo and Meten International Education Group have both gone public in the past two years, while VIPKid continues to attract funding under private ownership.

The leading generalists in the large-class K-12 online education segment also offer English tuition. They are Yuanfudao, GSX Techedu, Zuoyebang, and the online units of TAL Education Group and New Oriental Education & Technology Group, which are best known for their brick-and-mortar networks.

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