While it’s easy to focus on UK and US private equity firms entering the education market, you may not have heard of the Saudi firm Obeikan Investment Group (OIG). one of the key backers of Riverdeep’s US$3.5bn (£1.8bn) reverse takeover of US publisher Houghton Mifflin. OIG put up US$200m (£103m) cash for a 10% stake in the merged entity – the same amount as clients of Irish stockbrokers Davy.
OIG first hit our radar in 2005 when their subsidiary Obeikan Research and Development partnered with Intel to develop an Arabic version of Intel’s e-learning portal Skoool, for Saudi Arabia, Bahrain and Kuwait. It’s also interesting to note that the Press Office for Cambridge University Press operates from OIG’s Riyadh office.
There is growing competition to local private equity firms from cash-rich companies and consortia from the Middle East such as OIG, the Qatari Investment Authority, Istithmar, Investcorp and Dubai International Capital. Several are thought to be interested in investing in education. Their advantages over private equity firms are that they have huge amounts of capital (petro dollars), they have longer-term investment perspectives, and are therefore comfortable with lower rates of return on their investment.
It will be interesting to see whether private equity funds will lose their current interest in education if they risk being outbid by these groups, or whether they can use their local networks to attract deals that might be missed by investment funds from the Middle East. Aside from OIG, probably the best known Middle Eastern-based education business is Sunny Varkey’s Global Education Management Systems (GEMS), whose success in the UK independent schools sector has been limited and whose schools are rumoured to be for sale (and may have already been sold).
The population boom in the Middle East has already attracted the attention of UK education companies like Nord Anglia and CfBT, and with education being both a growth market and vital to the long-term (post oil) economic prosperity of the region, investing in education-related businesses is probably a smart move.
