Transform & Thrive - Insights

Leveraging Strategic Synergies in Mergers within the Education Sector

Many M&A transactions have taken place in the education sector since the late 2010s. Private equity funds have been establishing platforms and fuelling growth through acquisitions, leading to inflated acquisition multiples, with some deals reaching as high as 15-20x EBITDA.

Following years of robust external expansion, education groups have grown to be large and diversified. However, they often face challenges in integration and management due to their complexity. Moreover, the sector is at a pivotal point of transition: revenue from public funding is under pressure, while costs are no longer decreasing. The digital and technological advancements, although offsetting labour cost increases, indicate a shift in the industry's landscape.

Given this context, traditional buy and build strategies are no longer sufficient for creating value for both Private equity firms and education companies themselves. It is increasingly essential to focus on realising synergies within these large education groups, especially between online platforms and traditional institutions.

The rise of online learning, accelerated by the widespread digital adoption during the Covid crisis, indicates a significant upward trend. The normalisation of remote work further solidifies the long-term prospects of the sector.

Simultaneously, traditional schools have experienced rising labour and infrastructure costs. In our experience, unlocking synergies by merging digital and traditional school attributes can yield various benefits, including:

• Enriched portfolio through combining certifications to expand online offerings (cross-selling)
• Expedited internationalisation
• Improved lead generation and conversion by leveraging digital marketing capabilities
• Decreased drop-off rates through hybrid and physical module additions
• Cost efficiency through digitalising offline courses

The cumulative effect of these synergies can lead to an increase in profits, potentially boosting the EBITDA margin by 5 to 10pp of sales. When evaluating synergies and devising implementation plans, collaboration with management teams is crucial to ensure alignment and transparency of projected financial impacts. By conducting a thorough assessment encompassing qualitative and quantitative insights, organisations are better equipped to execute synergies with clarity and confidence.

In the ever-evolving market landscape, strategic foresight is paramount. Leveraging L.E.K.'s expertise enables education stakeholders to optimise synergies, fostering sustainable growth and profitability.

Realising Value from Generative AI: A Guide for Industrial Leaders

In its present state #GenerativeAI stands as a remarkably advanced and widely accessible #technology but does it really provide the expected #value everyone is dreaming of?

O&P Partner Sebastian Olbert and Manager Marc Seipp share the latest insights from their various C-suite collaborations with #Industrial #Leaders in the DACH region.

They see companies eager to explore potential use cases across three key dimensions:

?? Transforming operations

?? Optimising cost

?? Unlocking new revenue streams

The #Strategic #GenerativeAI Framework provides #Industrial #Leaders a structured guide to get started. You can read the full article here.

L.E.K. Thought Leaders

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Claudio Molinaro, Partner; Jean-Philippe Grosmaitre, Partner; Philip Roux, Partner; Sebastian Olbert, Partner; Sebastien Beausoleil, Principal; Tom Marshall, Principal