Going for growth GLOBAL: ACTIS

GLOBAL: ACTIS

Going for growth
London-based private equity firm Actis received
global media coverage when it announced its Honoris
project for Africa earlier this year. Kirsten Noben talks
to Hichem Omezzine, co-lead for global education,
about the firm’s strategy

A
           ctis at a first glance might look like a typical         South Africa’s private distance learning institutions, Mancosa
           investment firm. Since its inception, the fund has       and Regent Business School. To date, the project consists
           raised over $13 billion (£9.9 billion) and has a track   seven institutions spread out over nine African countries,
record of investing in real estate, energy and private equity       but plans to expand to more countries.
in emerging markets. However, Actis also has a genuine                 Whereas most traditional private equity investors are
commitment to the education sector having invested over             sometimes hesitant to invest in Africa, Actis has made it its
$500 million in recent years in the space.                          prime focus and the numbers are in their favour.
   When talking to EducationInvestor, co-lead for global               According to a report by consultancy Caerus Capital, 66
education, Hichem Omezzine, explains that as an investor,           million pupils could be enrolled in private education by
Actis’ key aim is to make a difference: “Our DNA as an investor     2021 and around $16-18 billion of private investment would
has always been with an interest in leaving a legacy in people’s    be required over the next five years. Moreover, the World
lives. At the same time, we’re also private investors that seek     Economic Forum estimated that private education on the
return, which I think that is a good balance.”                      continent would be valued over $2 billion over the next five
   Some of its investments globally include – apart from Africa     years, something investors will be keen to hear.
– higher education institution Cruzeiro do Sul and English             Laad agrees there are “bright prospects” for higher
language school CAN in Brazil. In China, it has education           education in Africa which is mainly caused by a lack of
counselling business the EIC Group which prepares students          decent public education. “The capacity of public universities
for studying overseas.                                              are quite constrained and most markets are also undergoing
   According to Sudeep Laad, vice president at Parthenon-EY,        a reduction in funding,” he says.
the firm is taking the right steps. “Education is a $4 trillion        For Omezzine, the rationale behind a pan-African higher
industry globally and the sixth largest component of global         education platform is also aligning the desire of employers to
economy, but only 20 companies have around $1 billion               find people with the right skills. Employment outcomes are a
in revenue. It happens to be a very fragmented market and           number one priority and Omezzine dreams of creating a pan-
therefore there is an opportunity to consolidate and grow the       African MBA, “to provide flavour of different countries and
right assets, which Actis has captured brilliantly,” he explains.   produce candidates that are more fit to the future of Africa”.
   Omezzine explains Actis has tapped into the market                  “The power of a scaled platform is very rare and enables
because of its increasing importance, driven by a number            you to knock on doors of the best multinationals and to
of structural changes. One of these trends is the rise of the       develop programmes and partnerships with them to sustain
middle classes globally, “who become more and more aware            the needs for the graduates. Therefore, we are much more
of the importance of education and have now the ability to          impactful for universities than small private players that
afford good private education,” Omezzine adds.                      don’t have the needs. The benefits of scale are numerous,”
   Moreover, “the role of education is becoming more                Omezzine adds.
important in certain geographies we cover, and the payback
has never been greater,” he asserts.                                Big and ambitious
                                                                    While Actis will keep scoping for opportunities in emerging
Blessing the rains down in Africa                                   markets, it also realises all too well that every single subsector
Actis’ most ambitious plan to date is the project Honoris           comes with risk, one of which is challenging regulations.
United Universities, which it advertised as the first Afri-            “We recognise this is an issue in most places and in certain
can private higher education network. It first acquired the         countries, such as China, it is not secret and you can’t invest
Universite Central Group in 2014, and expanded in 2016 to           in specific sectors freely,” Omezzine says. On the other hand,
Morocco through an investment in Mundiapolis. It also set           he is also optimistic about regulators globally evolving and
foot in anglophone Africa this year by investing in two of          realising the importance of private education.     ▶

30                                                                                                                        EducationInvestor Global • November 2017

GLOBAL: ACTIS

                                               The level of pricing
                                              is sometimes getting
                                            unreasonable and there
                                            is some appetite from a
                                            specific type of investors
                                              that are driving levels
                                                and liquidity in the
                                                      market

Hichem Omezzine, co-lead
for global education, Actis

EducationInvestor Global • November 2017                            31

GLOBAL: ACTIS

▶   He also points out the fragmentation of certain subsectors
could create some caveats but says this is offset by the
company’s international presence. “As an experienced
investor, the chance to observe what happens in different
countries gives us a good oversight on what is next; it gives
us the advantage to be able to identify themes early and
execute on it,” Omezzine says.
   One common theme that investors find problematic is
pricing in the market and Actis hasn’t been immune to
this. Omezzine admits the firm has been shied away from
assets in the past. “The level of pricing is sometimes getting
unreasonable and there is some appetite from a specific
type of investors that are driving levels and liquidity in the
market,” he explains.
   Laad agrees that assets are often not priced comparatively.
“Increasingly, education is becoming a proper sellers’ market
and valuations are often higher than buyers expect. But
when education assets are bought at right price, it can yield
good returns to investors. There are a lot of value creation
opportunities on the top line side such as improving student
acquisition and fixing pricing through proper segment level
benchmarking.”
   Additionally, Actis has fierce competition with quite
a few other investors in the space such as private equity
firm Development Partners International, which bought
the university UPM in Morocco in 2014, while other large
private equity firms such as Carlyle and Abraaj Group also
scan the market.
   Actis however is not daunted by this and will continue to
be bullish, particularly in higher education, which it believes
will continue to deliver the best opportunities for scaling.
“We remain optimistic about our ability to deploy more in
the sector. What we set out to do is big and ambitious on a
continental level.” n

32                                                               EducationInvestor Global • November 2017