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Laureate Education S1 IPO

Laureate Education announced that they were looking for investment bankers to get the company ready for an IPO. The S1 for the company has not been filed as of April 12, 2012 but is expected shortly.

What does this IPO mean for the for profit education sector?

This IPO is important from a morale point of view for the for-profit edu sector which has been hammered since 2010 due to various federal regulations. Most of the companies in the sector lost 30-50% of the market value within a few weeks and have barely recovered. It is important to note that they have stabilized given that the political attention is now more focused on the election.

Here are some key points to know about Laureate Education:

1) Laureate has a very large international footprint extending well into South America.

2) Laureate’s top brand in the US is Walden University which is known to focus more on graduate level education. My guess is that Walden student’s overall life time value is slightly higher due to this strategy making it somewhat different than the rest of the industry.

3) Laureate has President Bill Clinton on its board. This is a major boost from a political standpoint and will probably protect them long term from any major litigation brought forth by the DOE. This is speculation on my part.

4) Laureate has grown through acquisitions and opened up new markets in Western Europe, Asia and Latin America. The biggest focus is n Latin America though.

5) From a purely revenue standpoint it is hard to say if Laureate is more profitable or less profitable than the industry average given that their revenue model outside of the USA is not dependent on federal financial aid. Once the S1 comes out this will be more clear.

6) The focus program wise on the international level goes after Education, Health Sciences, Art, and Hospitality. Essentially all of these sectors allow people to leave their country and are considered high demand fields. I can see why a lot of students would want to get an international education in a developing country and pay a premium for it.

7) A major benefit from these schools is the ability to do the student exchange and potentially visit or study in other countries.

8) They have over 675k students worldwide!

9) Other major for-profit schools in the US have been slow to move internationally.

10) They have a network of over 60 schools worldwide. Each one has a different brand though which may cause some issues long term with branding and quality control.

With their additional capital from the IPO, I think they will continue to grow through acquisitions and continue to flex their political muscle to build a truly worldwide brand.

From a larger perspective, their business model is under attack from systems like KhanAcademy, SkillShare, Udemy and numerous other universities entering the same markets. If you have ever visited South East Asia, you know that there are tons of schools appearing every day and still demand for these schools outstrips supply.

Being able to develop a legitimate brand in each country and then move into an online model will allow them to create a strong long term revenue model assuming people in each of those countries is able to pay for it.

Lastly one must consider political systems for funding. Going into a socialist or communist country where education is already paid for, people are going to question if a private high tuition school makes sense.

Looking forward to the Laureate S1!

Additional information can be found here on the Reuters website. 

 

About Krish Sailam

Krish is a writer based in the Austin, TX area that is focused on making information easier to digest. Krish's enjoys topics around education, technology, economics and online marketing.

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