Putting his personal stamp on the strategy cited as a major reason for taking his company private, Laureate Education chief executive Douglas L. Becker is moving to China to oversee the Baltimore company's expansion in Asia.
Becker, who led the $3.82 billion buyout of Laureate that is about to close, said he will move with his family next month to establish a new Asian headquarters in Hong Kong - a central location with access to South Korea, Japan, India, Vietnam, the Philippines and Singapore.
"It sends a really important message on our intention for expansion," Becker said.
"We're going to be looking to develop a strategy to encompass all major [Asian] countries," he added. "We've had people in those markets for many, many years. For me, the opportunity is to go there and absorb everything we've done and set a strategy and build a team and then come back."
Becker expects to return to Baltimore in a year. Laureate's headquarters will remain in Baltimore; the city awarded tax breaks for the developer of a Harbor East project in part to lower rents for Laureate, its anchor office tenant.
His move underscores the challenges Laureate will likely face in Asia, where there are fewer private postsecondary institutions yet more regulatory and cultural hurdles to overcome, particularly in China. Becker has said that going private allows Laureate to move aggressively into inherently risky markets without the pressures of Wall Street.
The postsecondary market abroad is larger than the one in the United States and growing much faster, according to a recent report by BMO Capital Markets analyst Jeffrey M. Silber, who follows the for-profit education sector. The fastest enrollment growth is happening in East Asia and the Pacific, particularly in China, where its postsecondary enrollment grew nearly 28 percent in the 2003-2004 school year, Silber wrote.
Trace Urdan, an analyst at Baltimore's Signal Hill Capital Group, said opportunities in Asia are great because of rapid population and economic growth there. Urdan said it makes sense for Becker to have a face-to-face presence in Asia, particularly in China, where the economic climate is more tightly controlled.
The move "speaks to the sense that China is an enormous opportunity for the company but one that's challenging," Urdan said. "He feels being closer to the market will make all the difference in being able to build the kinds of relationship that they need in the company side - hooking up with a company that makes sense for them - but also in the government and regulatory side."
"I think their most successful deals in Mexico and Brazil have been deals that have come out of many years of relationship building, many directly by Doug," Urdan added.
Becker's move was first reported in The Chronicle of Higher Education. Becker sent an e-mail message to employees yesterday, the publication reported.
Laureate operates Walden University, its U.S. flagship online university, and about two dozen colleges and universities abroad in countries including Spain, France, Mexico, Chile and Brazil. About 80 percent of its revenue is generated in nations in Europe and Latin America.
Laureate has expanded in those countries primarily by acquiring existing schools. It has also made investments in institutions where direct ownership is not permitted by law and formed partnerships that allow Laureate to operate nonprofit institutions through management and service contracts.
Becker said it's still too early to say which strategy will work in Asia. And he acknowledged the difficulties Laureate will face in China, pointing out that the country still has many restrictions on private sector investment in education.
"It is a market that needs to be entered with great care and, in fact, that's a big part of what I hope to do, is to gain a deep personal understanding of how we can best support the objectives of the Chinese government in the way we choose to enter that market," he said.
This is not the first time Becker has personally overseen the country's expansion outside Baltimore. When Laureate's predecessor, Sylvan Learning Systems Inc., launched its higher education business, Becker moved to London to find opportunities there.
"I used my time in London to personally oversee development of an investment strategy of Sylvan into Europe," he said. "It resulted in us acquiring a university in Spain."
In 2003, Sylvan split into two companies, Laureate and Educate Inc., which also was taken private recently in a management-led buyout.