CITIC to build China construction education business

Phase two started with the rise of the English training and extracurricular tutoring market in 2007 and the subsequent listings of Ambow Education and Xueda Education Group. According to Deloitte, the third phase will come to fruition from 2016, with online education providers to the fore.

Given its focus on test preparation for and vocational training in China's construction sector, Study & Share has much in common with the phase one generation. But CITIC Capital Partners, which recently acquired the company, is looking to transplant the business into phase three.

"The company is fundamentally an offline training provider but we have noticed a clear trend toward online education," says D.J. Luo, executive director at CITIC. "It is not necessarily about being purely online, but offering an offline-to-online solution. Through this model training companies can provide a more holistic and comprehensive training environment."

CITIC has not disclosed the transaction size but it is understood to be more than RMB100 million ($16.2 million). The plan is to build an online platform on top of Study & Share's network of more than 40 learning or student recruitment centers across tier-one and tier-two cities.

Over the next five years, the professional qualification test market - of which the construction sector is the largest piece - will expand by 10-15%, driven by increased enforcement of certification requirements.

"The demand is there," says Luo. "The macro environment is slowing and a lot of sectors are sluggish, but if you look at the education sector it has maintain double digit growth and it hasn't showed any sign of slowing down."

Luo describes the investment as a "growth buyout" deal, with Study & Share's founder retaining a significant minority stake in the business and staying involved in day-to-day management of the business.

"In many cases we want to work with the founders and leverage their network experience and know-how," he adds. "The challenge is really how to work with the fonder and develop a winning strategy and make them more successful on a national level."

The sector is also ripe for consolidation, with investment yet to match the size of the opportunity because there are so many small players that can't attract big-ticket backers.

"There will be consolidation but the precondition is that the market has market leaders because if you bundle a bunch of chickens together, it doesn't make a horse," Luo says. "You need a strong player to consolidate and we can use our platform to merge with other sub-scale players."

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• Topics
• Buyouts
• Greater China
• Consumer
• Education
• buyout
• CITIC Capital
• China