Cognita, the international PE-backed education group with 68 schools, could be valued at an impressive £2bn, according to a report of its impending sale. What does this success tell us and what should investors look out for in similar education and child-focused businesses? What are the specific ESG risks and opportunities in such sectors? And how can PE convince sceptical or hostile audiences of the benefits of PE involvement?
The private education sector was for many decades, like fostering and nursery care, characterised by a myriad of small providers whose success was often driven by their reputation rather than parents’ appreciation of the proven superiority of particular teaching methodologies or care models.
What is striking about Cognita, along with many other large PE-backed businesses in education, fostering and nursery care, is the emphasis on continuous improvement, careful integration of new sites and organisations and the sharing of best practice, all while preserving their individuality.
But the benefits of these PE skills – which PE uses to create value across all manner of B2B and B2C businesses – is often overlooked. PE is able to do what many public sector and private sector businesses fail to do, which is to successfully implement and improve tried and tested systems across different sites and indeed borders. Education is an area where there is often a large gap between the latest research on what works and the reality of trying to translate and further test that research on the ground.
PE and PE-backed businesses in politically sensitive areas, including education, could win over more hearts and minds if they focused on demonstrating how PE can and has spread best practice, and to what effect.
However, growth-focused investors need to be careful about whether an asset’s governance is capable of addressing the demands placed upon a business in times of rapid expansion, where new operational and regulatory environments might, for example, require significantly improved anti-bribery and corruption policies, practices and monitoring. Different geographies may also require different approaches to managing diversity in the classroom: for example, the UK is keen to increase the number of male primary school teachers.
Investors also need to ensure that the asset has the capacity and expertise to incorporate rapidly changing best practice, political expectations and regulatory requirements in areas such as vulnerability, diversity and gender.
PE’s expansion into areas like education, fostering and nurseries, and their emphasis on continuous improvement, needs to be celebrated. But it also needs to be handled and communicated with great care.
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