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Another Training/Education Deal

March 21

One of the few bright M&A spots in the services industry firmament has been training and education. Now comes news of one of the segment's larger deals in recent times --DeVry's purchase of Ross University for $310 million in cash.

Based in the Chicago area, DeVry was among the first private players to establish a strong and profitable presence in the technical training business, offering a practical alternative to expensive liberal arts programs that leave their graduates with little clear career direction. However, in recent years demand for technical training has slowed as the IT industry itself has declined.

DeVry's acquision target, Ross University, specializes in offering medical and veterinary degrees to students unable to gain admission to American schools. Operating from Carribean facilities, Ross has substantially improved its profitabliity since it was purchased by New York private equity firm Leeds, Weld & Co. and Boston-based JW Childs Associates in 2000. They determined that Ross' rate of student turnover was costing them $30,000 per head, so by "intervening" early to assist these flunking students, profitability soared.

We're not sure we'd want to seek out a Ross graduate for our own medical care, but the deal returns to Leeds, Weld and JW Childs five times their money in two years. These business doctors healed their investment nicely.

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