Legal structure of PE investment in the private education industry

The wave of private equity investment in the private education industry began with the listing of New Oriental Education & Technology Group in 2006. Based on our observations, the focus of investment subsequently has run the gamut of the asset-light and highly competitive training business, asset-heavy higher education mainly relying on national planned admission quotas, pre-school education run as a chain business, examination-oriented after school tutoring, etc.

In recent years, with the increasing difficulty in finding employment and the lag in reform of the educational system in China, recruitment of students to higher education has become more difficult, and that, coupled with the trend of ever younger students going abroad to study, has seen many investors turn to the international high school and overseas study industry. A lot of funds focus on the “big consumption” concept, pursuing such sub-sectors of the training business as young learners training, continuing adult education, vocational training, etc. In addition, online education has become the hot topic in this industry, attracting numerous enterprises that were never involved in traditional education to join in the market competition.

It is our opinion that although there has been a rotation in the favoured targets of investment in the past 10 years, the development of the entire education industry remains in its infancy. Furthermore, in addition to direct private equity (PE) investment and initial pubic offerings (IPOs), various manner of merger and acquisition (M&A) transactions are picking up steam in the market.

Wu Guanxiong is a partner at Tian Yuan Law Firm in Beijing. He can be contacted on + 86 10 5776 3600 or by email at wgx@tylaw.com.cn