Developments in the world of private for-profit global higher ed

The private for-profit global higher ed world generated three news items of note this morning.

First:

LAUREATE EDUCATION, INC. ACQUIRES LEADING UNIVERSITIES IN MEXICO AND COSTA RICA

Baltimore, Maryland, July 8, 2008 – Laureate Education, Inc. today announced it has acquired the Universidad Tecnológica de México (UNITEC), one of the largest private universities in Mexico, and the Universidad Latina and Universidad Americana (UAM) in Costa Rica.

UNITEC has eight campuses throughout Mexico, including six in Mexico City, one in Guadalajara and one in Monterrey. The university has a 40-year tradition of providing higher education throughout the country, and today serves more than 36,000 students….

Universidad Latina, the largest private university in Costa Rica, was founded in 1989 and has more than 16,000 students. The university is widely recognized for its health sciences programs, including medicine and dentistry. UAM, founded in 1997, has more than 4,000 students, and specializes in business education. Combined, the schools have 13 campuses throughout Costa Rica.

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Second:

APOLLO GROUP, INC. APPOINTS STRATEGIC AND FINANCIAL ADVISOR CHARLES B. EDELSTEIN AS NEW CHIEF EXECUTIVE OFFICER

PHOENIX–(BUSINESS WIRE)–July 7, 2008–Apollo Group, Inc. (Nasdaq:APOL) (“Apollo Group,” “Apollo” or “the Company”) today announced the appointment of Charles “Chas” B. Edelstein as Chief Executive Officer and Director, effective August 26, 2008. Apollo’s founder, Dr. John G. Sperling, continues to act as Executive Chairman of the Board of Directors….

Mr. Edelstein, 48, has more than 20 years of experience as a strategic and financial advisor. He joins Apollo Group from Credit Suisse, where he served as a Managing Director and headed the Global Services Group within the Investment Banking Division, as well as the Chicago investment banking office. Mr. Edelstein founded and oversaw Credit Suisse’s leading advisory practice in the education industry, where he served as advisor to many of the largest education companies, including Apollo Group.

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Finally, the Wall Street Journal noted, today, that Marcus Brauchli, the former managing editor of the Wall Street Journal (now owned by Rupert Murdoch) will become the Washington Post’s new executive editor. The formal press release is here.

Why profile this topic? Recall that the Washington Post, despite its iconic status, is effectively being bankrolled by private for-profit global higher ed (aka Kaplan), as we noted in an entry titled ‘Pulitzer Prizes and the global higher ed industry‘. This point is reinforced in the Wall Street Journal:

But the Post has been struggling with the same forces that have devastated the newspaper industry in recent years — defections of readers and advertisers to the Web. Over the past 24 months, the paper’s weekday circulation has dropped 7.1% to 673,180, according to the Audit Bureau of Circulations. Print-ad revenue fell 13% in 2007, according to the Post. While Washington Post Co. has been somewhat insulated from the impact of these changes by its profitable Kaplan education business, the paper has lately taken steps to cut costs. It eliminated more than 100 newsroom positions, bringing the total newsroom count to about 700 from its peak of more than 900 in 2003. Some staffers worry that further cuts are coming.

These three news items are lenses onto three related development patterns:

  • Diversification, dependency, and cross-subsidy via for-profit private higher ed (in the case of Kaplan).
  • The extension of private higher ed networks into new ’emerging market’ geographies via the acquisition of private universities (in the case of Laureate).
  • Financialization, with institutions of for-profit private higher ed reaching into the calculative networks that enable global higher ed value chains to be designed and brought to life (in the case of Apollo).

Given the scale of education services on offer via Laureate, Apollo, and Kaplan – over 2 million students being served right now – these news items and development patterns are worth taking note of.

Kris Olds

First Latin American ad/venture for ‘for-profit’ globalising university, Apollo Global Inc.

Last week the recently launched Apollo Global Inc., a subsidiary of the Apollo Group and private equity firm The Carlyle Group (specializing in buyouts, venture and growth capital, leveraging finance around the globe), announced that it had agreed to acquire Universidad de Artes, Ciencas y Communication (UNIACC), an accredited, private arts and communications university in Chile, as well as it related entities.

This is the first ad/venture for Apollo Global Inc. since it was created in 2007 – to drive forward global investment in higher education in those countries are seen to have attractive demographics, good levels of economic growth and a regulatory environment that does not inhibit FDI in the education sector. The country region to be given to ‘thumbs up’ by Apollo Global Inc. is Chile.

According to Apollo Global Inc. Chairman, Greg Cappelli:

We have been working diligently to identify opportunities that will create value for Apollo shareholders, and we believe UNIACC, coupled with Chile’s table economic environment, strong student enrollment trends, and openness to foreign investment, is an excellent fit.

What makes Chile a particularly attractive country to invest in, according to Apollo Global Inc., is that growth in the private higher education sector outpaces that of the public sector. This view is shared by industry analysts (see, for example, the excellent Observatory for Higher Education’s report in 2007 on Latin America by Sylvie Didou Aupetit and Lisa Jokivirta), who argue that is the massive growth in student enrolments in higher education systems in Latin America that has promoted the surge in the number and diversification of foreign providers operating in the region since the early 1990s.

In the main, language has been regarded as the main barrier to widening out the range of players in the field, beyond those that reflected old colonial histories – Spain and Portugal. However, it is also evident that the strong commitment to the idea of education as a public good in many Latin American countries has created a less than welcoming environment for foreign investors – particularly for-profit firms.

However that said, the 2008 foreign education landscape in Latin America, and Apollo Global Inc. first venture into Chile suggests that there are significant changes taking place. A range of European universities (aside from Spain), including those from Germany (U of Heidelberg), Italy (U of Bologna), France, Belgium, Canada and the USA have all made major investments in the Latin American region.

On the for-profit front, Apollo Global’s first big investment takes it into a geo-economic and political sphere that has, so far, been dominated by Laureate Education Inc. (previously Sylvan Learning System). Laureate’s Latin American operations are located in Central and South America. It first entered the Latin American market when in 2000 it acquired both the Universidada de las Americas (UDLA) in Chile (established in 1988 ) and one of Mexico’s largest and more prestigious universities founded in 1960, the Universidad del Valle de Mexico (UVM). Since then Laureate has rapidly advanced its commercial interests in Latin America, acquiring not only more universities in Chile, but developing a presence in a range of other Latin American countries, including in Ecuador (2000), Costa Rica (2003), Peru (2004), and Panama (2004), Honduras (2005) and Brazil (2005).

So why should Apollo Global Inc. acquire UNIACC? For one thing, it is one of the leading arts and communications universities in Latin America. It was also, in 2004, the first Chilean university to teach a fully on-line undergraduate program. Since then, new on-line programs have been added.

The value for Apollo Global Inc. in buying up UNIACC, is to not only to secure the ‘local brand value’ of UNIACC (and hence keeping off the agenda for Apollo Global charges of imperialism and neo-colonialism), but also because UNIACCs recent capability to deliver on-line programs, potentially positions Apollo Global Inc. as a supplier of cross border services within the region.

Let’s see whether Apollo Global also learnt a lesson from one of its parent companies, who were recently charged with aggressive recruiting practices in the US.

Susan Robertson

Apollo Group fined for aggressive recruiting practices

Recruiting students in the global higher education marketplace is a tough business. Clearly, however, some universities are seen as overstepping the bounds of what is acceptable practice and for that have been the subject of criticism by regulatory authorities.

Today the Chronicle of Higher Education reported that Arizona’s federal jury had fined the Apollo Group, the parent company of The University of Phoenix, for withholding this report criticizing the Group’s aggressive recruiting practices. The jury ruled that by withholding the report, the Apollo group were misleading the shareholders, and ordered them to pay $280 million.

Ouch!

Susan Robertson