Global investors still enticed by education

June 18, 2021 | 09:00
Driven by a growing middle class and drastic changes due to social restrictions, the education sector remains a lucrative business for investors with robust mergers and acquisitions and private equity investments underway.
Global investors still enticed by education
Global investors still enticed by education - illustration photo

EQuest Education Group pulled new investment from global investment firm KKR on June 1. The deal is part of KKR’s plan to triple investment in Vietnam in the next decade to capitalise on the rising demand and expanding middle class.

The US buyout firm’s investments in Vietnamese assets crossed $1 billion last year after a KKR-led consortium bought a stake in Vinhomes JSC, the largest real estate developer in the country. Beside major investment in real estate assets, the group is now pinning its hope on the fast-growing education market.

Among them, edtech startups have been one of the hottest investment markets in Vietnam, wooing millions of venture funding this year. ELSA, a mobile app that helps non-native English speakers improve pronunciation and speaking skills, secured $15 million in a funding round co-led by Vietnam Investments Group and SIG. Meanwhile, another edtech startup, Edmicro, closed a pre-Series A+ round from Singapore-based venture capital firm BEENEXT, Qualgro, and Insignia Ventures Partners.

Que Vu, partner of law firm Rajah & Tann LCT lawyers, told VIR that Vietnam is on track with a steady increase in mergers and acquisitions (M&A) deals. In education, such deals have become a hot trend in recent years because Vietnam is a developing country with the highest GDP growth rate in Southeast Asia. This teamed with a population of around 100 million people provides ample opportunity in education.

“The younger generation is willing to spend on education opportunities for themselves and their children,” Vu said. “Along with more international schools being opened at all grades, more English language centres have opened to meet demand for English learning at a variety of different ages. Big cities like Hanoi and Ho Chi Minh City now have more than 450 English language centres and more than 50 schools delivering international learning programmes.”

In addition, Vu noted that changes to the legal framework of Vietnam also bring more opportunities for investors. Specifically, the Vietnamese government has committed to opening the market to the education sector for foreign investors and raising the Vietnamese student limit in international schools to 49.9 per cent, a significant increase from the previous 10-20 per cent limit.

The education sector has also been given much attention to by both domestic and foreign private investors. Some notable private equity investments in the education sector are Mekong Capital’s funding of Yola, TGP’s investing in VAS, Cognita’s cash injection in the International School of Ho Chi Minh City, and North Anglia’s takeover of BIS, as well as the latest deal between KKR and EQuest.

Nguyen Tri Hien, CEO of Green Universal Education Technology JSC, highlighted that Vietnam’s edtech market has lured around $45 million capital in 2020, and many overseas companies have aggressively introduced their education tech in Vietnam.

“The edtech market is estimated to reach a value of $4 billion by the end of this year,” he said, adding that there will be more deals and foreign startup arrivals in the market over the next two years.

At the end of April, English-learning startup Astrid from Sweden has made its official foray into Vietnam. The startup’s app has a cheerful and engaging interface and rewards users for progress and encourages them to keep playing and learning English.

Meanwhile, Singapore-based NPX Point Avenue, an edtech company focused on the fast-growing K-12 private international school market and the after-school training market, also closed a $12-million deal in a Series A funding round led by Hong Kong-based private equity firm Gaw Capital Partners. The funding will help the company to expand its presence in Vietnam.

The pandemic has pushed colleges, universities, and companies to operate remotely, which leads to an increased use of online learning and the rise of edtech startups. Experts predict that the future education model will likely be a combination of online and offline, known as blended learning, where online education acts complementary to the traditional brick and mortal model.

Besides edtech startups, experts agree that investment in kindergartens and K-12 schools will continue to flourish, including new establishments, M&A, and private equity transactions. This segment has enjoyed more attention than any other segment in recent years and has been on the radar of both strategic and financial investors.

If Vietnam’s higher education market can improve training quality up to international standards, Vietnamese students may consider studying in Vietnam, and the relatively high amount spent on education would likewise stay in the Vietnamese economy, according to Que Vu from Rajah & Tann LCT lawyers.

She said that Vietnamese legislation on higher education records certain amendments and supplements that would attract foreign investors in this sector. New provisions under the amended Law on Higher Education grant more autonomy to foreign-invested universities and a new model of foreign branch campus was recently introduced which is expected to receive guidance from the Ministry of Education and Training soon.

“I believe that higher education in Vietnam could be a promising business for foreign investors and interested parties have already signalled their intentions to get involved in the potentially burgeoning education sector,” she stated.

By Olivia Bui

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