xml:space="preserve">
xml:space="preserve">
Advertisement
Advertisement

Laureate Education eyes growth in emerging markets

Eilif Serck-Hanssen, the incoming CEO of Laureate Education Inc,, at the Harbor East headquarters for the company, which has a network of international for-profit universities.
Eilif Serck-Hanssen, the incoming CEO of Laureate Education Inc,, at the Harbor East headquarters for the company, which has a network of international for-profit universities. (Amy Davis / Baltimore Sun)

Not quite a year into its second stint as a publicly traded company, Laureate Education is preparing to install its second-ever CEO, who will have the challenge of lifting the company out of debt while pursuing aggressive growth.

Eilif Serck-Hanssen will succeed longtime Laureate CEO Doug Becker on Jan. 1.

Advertisement

He said the Baltimore-based company, which owns and operates a network of international for-profit universities, plans to accomplish its goals by leaving less profitable markets, while developing a technology platform that will allow Laureate to tap into new, emerging markets with growing demand for low-cost education.

"We want to lift the economic prosperity in the areas we are serving, and we think there's a huge and strong correlation between the growth of the middle class and the growth of higher education," said Serck-Hanssen, a former airline executive who joined Laureate in 2008 as chief financial officer. "To be able to do that, we need to have a sustainable company ourselves."

Advertisement
Advertisement

Fast-growing economies in emerging markets such as Asia, Latin America and South America are creating new demand for college degrees among middle-class citizens, many of whom are first-generation students and whose families can’t afford to send them to elite American or European universities.

But to succeed, analysts warned, Laureate will need to pay close attention to quality and post-college job attainment to distance itself from the unsavory reputation some online for-profit universities have developed in the United States and to avoid the pitfalls that hamstrung other academic institutions’ international aspirations.

“There is a large and growing market, and it’s one the universities have tried to capitalize on,” said Gerald LeTendre, an education professor at Pennsylvania State University. “It didn’t work out well for a lot of them.”

Universities have long sought to establish international branches, where students can spend a semester immersed in a foreign culture, while attracting new international students. But high start-up costs and significant cultural differences have led many schools to trade in international branches for exchange programs with existing schools, LeTendre said.

Advertisement

Laureate’s model of acquiring and running schools locally could be a more effective approach, he said.

The company, headquartered in Harbor East, has 69 universities in 25 countries, making it among the largest global networks of degree-granting higher-education institutions.

Born out of Sylvan Learning Corp., the tutoring company Becker and his business partners acquired in 1991, Laureate went public in 1993 and was taken private again in 2007 after a leveraged buyout that left it saddled with debt.

Laureate went public again in February, raising $490 million in an initial public offering. Initially sold at $14 a share, its stock peaked in June at $18.51 a share but since fell back, closing at $10.53 on Wednesday.

One of the company’s most pressing challenges is reducing its debt. The company had $3.2 billion in long-term debt at the end of September, down from $3.8 billion at the end of 2016.

To further reduce debt, the company plans to shed operations in between five and seven markets with a total of about 10 schools by early next year. Serck-Hanssen declined to identify the locations but said they account for less than 5 percent of Laureate's business and are "unlikely to really move the dial for us."

The move, announced in May, will allow Laureate to focus on markets in Asia, Latin America and even Africa, where it sees greater opportunity for growth.

While elite American and European universities are increasingly recruiting in the same markets, Serck-Hanssen said they don’t pose a threat to Laureate’s growth. Laureate’s schools target a different kind of student: first-generation university goers from middle-class families that can’t afford to send their children to elite international institutions.

Tuition ranges from $4,000 to $6,000 a year at three-quarters of Laureate schools, and is primarily paid by students’ or their families’ fees, not with loans. Some schools with fewer amenities and facilities charge less, between $2,500 and $3,500 a year.

At the same time, Laureate is testing ways to convert its educational model into a technology platform that could be used to offer degree programs in places where the company does not have a brick-and-mortar school. The company thinks it can offer degrees at an even lower price by packaging curricula that could be taught by working professionals in borrowed classrooms.

The model would allow Laureate to capture a largely untapped market: students who would otherwise not be able to afford a degree program.

“What Laureate is all about is to create quality higher education at affordable prices to the emerging middle class,” Serck-Hanssen said. "The further down we can get into the socioeconomic pyramid, the greater impact we will have."

Laureate Education, a Baltimore-based company that owns and operates universities around the world, became a public company again on Wednesday, raising about $490 million in its initial public offering.

Despite Laureate’s significant opportunity for growth, the company must distinguish itself from for-profit institutions in the United States that have attracted negative media attention, analysts said.

For-profit higher education chains have been the target of increased regulator scrutiny, over concerns about misleading advertising, aggressive recruitment and reports that students struggle to get jobs with their degrees.

Corinthian Colleges and ITT Technical Institute, two of the largest for-profit university networks, shut down.

Laureate has had its own share of controversy, making headlines during the 2016 presidential election, when Democratic nominee Hillary Clinton’s campaign released tax returns showing Laureate had paid former President Bill Clinton $17.6 million over six years to serve as its honorary chairman, though the partnership was announced in 2010. Hillary Clinton was secretary of state at the time and Laureate was acquiring universities around the world.

“The brand of online education, the brand of for-profits in this country is not well regarded,” said Henry Lucas, a professor of information systems at the University of Maryland's Robert H. Smith School of Business.

A keen attention to recruiting tactics, price, quality and job placement will be key to protecting Laureate’s brand, Lucas said.

Laureate’s status as a public benefit corporation could help assuage those concerns, LeTendre said.

Advertisement

Benefit corporations are for-profit companies that commit to making a positive impact on society as a core mission and measure of the company’s success.

Advertisement

The designation is “a very smart start to ensure your reputation is clear and your strategy is clear,” LeTendre said.

Serck-Hanssen said the company's status of a benefit corporation is an important part of Laureate's identity and is evident in its efforts to reduce the cost of college.

"We recognize our customers are millennials who care about more than the product itself," he said. "Being an international university company that wants to be cutting edge when it comes to innovation and thought leadership, this is a very important aspect of how we do business."

Business videos

Recommended on Baltimore Sun

Advertisement
Advertisement
Advertisement
Advertisement