The trend of mergers and acquisitions in Brazil's private education sector hit a record level last year. Only the operations (about 20) held for four publicly traded companies moved £ 800 million. In total, there were 27 transactions, but there is no precise data about the surrounding smaller and privately held institutions. There has never been such a high value in the country since at least 2007, when the major education groups began to open their capital and began to make their accounts public. In 2012, the sector should continue to record business deals, because there is still room for consolidation in the elementary and secondary education sectors, confirms Luis Motta, a partner at KPMG.

The Brazilian education market ended the school year moving around about £ 800 million in acquisitions. This is the amount invested only by Anhanguera, Abril Educação, Estácio e Kroton, according to a survey done by Valor. It is the largest volume ever traded on purchases of companies in the education sector in the country since at least 2007, when education groups began to go public. Since then, the amount invested in mergers and acquisitions almost quadrupled in size.

Taking into account the total number of mergers and acquisitions in education (including private companies) there were 27 transactions in 2011, according to consultancy KPMG. Of this total, about 20 involved publicly traded company. It is not possible to tell the full amount of the transactions because there are operations whose terms were not disclosed.

The sector should continue to record mergers and acquisitions in 2012."There is room for consolidation in primary and secondary schools and in education systems," says Luis Motta, a partner at KPMG. The record year was in 2008, with 53 deals. Several companies have gone public on stock exchanges and went shopping, "but businesses with financial volumes were lower. There were no significant transactions like, for example, of Kroton," says Motta.

In 2011, a record of transactions was driven by the minin company, Kroton, who bought Unopar (University of Northern Paraná) for £ 430 million, which has as a lure the status of the leading distance learning institution. This agreement, led by the president of Kroton, Rodrigo Galindo, was the largest ever closed in the history of the education sector in the country. Such a commitment on the part of Kroton, whose main shareholder is the American fund Advent, is the market potential of distance learning that can double in size in five years.

Another highlight was the transaction of Anhanguera, which paid £ 170 million for Uniban - one of the last large universitiess of São Paulo that had not yet been sold. With the acquisition, the college controlled by private equity fund Patria set its foot in the São Paulo market, considered the most profitable in the country.

Anhanguera is the largest education group in the country with 292,000 students. But Kroton came close to the leader by bringing in Unopar and now ranks second, with 264,000 students. The national market of higher education has 5.3 million students, and 75% are enrolled in private colleges.

The strong shift in the education sector was also motivated, since 2010, by the recovery of investments of British Pearson and Brazilian Abril Educação. Both were investing shyly in the country and disbursed significant sums to acquire two education systems (handouts). In July 2010, Abril Educação acquired Anglo for £ 240 million. Ten days later, Pearson announced the acquisition of SEB’s education systems (COC, Dom Bosco and Pueri Domus) for £ 295 million. With Anglo, Abril Educação went to the stock market, raised £ 105 million, and closed four acquisitions in 2011, which totalled £ 93 million.

In December, Pearson announced the purchase of 45% of Companhia das Letras through its publisher Penguin. With the purchase of one of Brazil's most prestigious publishers, Pearson will be able to integrate the education and literature businesses. One idea is to expand the library collection of Pearson’s virtual works with works from Companhia das Letras.

Source: Valor Economico (March-2012)
Author (s): By Beth Koike | From São Paulo