THE SOURCE OF INSPIRATION

05 January 2017

"Under the leadership of former private equity investor Nadim Nsouli, the Inspired schools group has grown quickly. Will it be able to keep up its momentum, asks Kirsten Noben"

Original Education Investor article

Readers of EducationInvestor may have noticed the name Inspired, and prior to that its holding company Educas, popping up in these pages with increasing regularity. The for-profit schools group has bullishly been snapping up schools around the globe, acquiring Umhlanga College in South Africa, Colegio San Mateo in Colombia and Brookhouse School in Kenya in the last 12 months alone.

This has all happened under the guiding hand of Nadim Nsouli, who is already quite a big name in the education sector. After working for years at Providence Equity Partners, the US backer of such companies as Study Group and Blackboard, he spotted an opportunity to establish his own international network of private schools and founded Educas in 2013. Today, operating under the consumer facing name Inspired, the group comprises 23 schools across Africa, Europe, Australia and South America and has around 15,000 students. 

Backed by Oakley Capital and several family offices, it has long-term capital to invest in the education sector, Nsouli says, something that sets it apart from private equity-backed rivals. When speaking to him over the phone in New York, he explains this is its biggest advantage.

“Rather than traditional private equity with a [shorter term] exit horizon, our family offices are passionate about the education sector and have a very long term view. We differ from our competitors in the way that we are privately owned and in our interaction with the owners. Because of those reasons, we can move much more quickly.”

Ramping up

Nsouli believes Inspired can offer a more personal ‘touch’ in its relationships with school proprietors, which is why many prefer to be subsumed into his group as opposed to a private equity-backed or publicly traded entity. Inspired has highly respected educationalists in its management team too, he says, “which provides significant comfort to family owned schools that may be looking for a [new] home”.

The group also has the luxury of being able to build its own schools from scratch, not just acquire them, which has also helped it ramp up quickly. Soon, Nsouli believes, Inspired will compete with the leading international school groups Nord Anglia, Cognita and GEMS Education. To back this up, Nsouli proffers impressive growth figures: the company has increased its ebitda by over six and a half times in the last three years, from €6 million (£5 million) in July 2013 to around €40 million today.

Although Inspired could to outsiders seem a one-man band, people with local expertise have been key to its international rollout. For its African expansion the company got Graeme Crawford on board, who is described by Nsouli as a local “legend” in South Africa. Founder of Crawford colleges, he built many of the top-ranking private schools that now form part of local education conglomerate Advtech. Educas’ first transaction in July 2013 was the acquisition of the four Reddam House schools in South Africa from Crawford.

According to an expert who prefers not to be named, “Crawford must have had a defining role in growing the business to what it is today because the African schools have generated the most profit for Inspiring”.

Another source tells EducationInvestor “they are impressed” with the African acquisitions as “they are doing extremely well”. Indeed, Inspired is growing fiercely on the continent, building two to three schools and acquiring one school per year, according to Nsouli. This means it has added extra student capacity of around 3,000 to 4,000 since launching in July 2013.

In the UK, the company depends on expertise of Dr Stephen Spurr who has worked in education for years, including as a former head of independent school Westminster. It has also poached expertise from its competitors, such as Jenny Aviss who was director at Alpha Plus Group and who will now be the group’s new chief operations officer.

In Latin America, where Inspired is present in Colombia, the firm put together a team with local expertise early on. The strategy differs from in other geographies, Nsouli says, where “we added people as we grew. In the Americas, we are starting with a top team from day one.”

Inspired’s schools include:

• Reddam House South Africa (Johannesburg, Cape Town, Durban-multiple campuses)/UK (Berkshire)/Australia (Sydney)

• Reddford House South Africa (Johannesburg, Pretoria)

• Fulham Prep UK (London)

• St George’s School Switzerland (Montreux)

• International School of Europe Italy (Milan, Monza, Modena, Sienna)

• St Louis School Italy (Milan)

• St John’s International School Belgium (Brussels)

• Brookhouse School Kenya (two campuses in Nairobi)

• Colegio San Mateo  Colombia (Bogota)

Fast or slow?

The business faces risks, though. One is that it could grow too quickly while failing to provide a consistently high standard of education – a big issue for a firm which operates only in the premium space. The other is maintaining its entrepreneurial momentum.

“Building an education team and keeping the business entrepreneurial are our main challenges,” Nsouli explains. “I don’t want to turn it into a slow moving corporation.”

Inspired’s growth model is simple: if it can’t build a greenfield site then it will seek to acquire a school, sometimes a strongly performing one, sometimes a lower priced asset which it can turn around. One example is Reddam House school in Berkshire, UK, which was previously charity-owned and in decline, but today is on its way to becoming a top-tier school. “We have invested several million pounds in upgrading it and hiring some of the best teachers in the UK, and less than a year after we launched it received an outstanding Independent Schools Inspectorate report,” Nsouli says.

However, the turnaround part of the plan has its limitations, claims one source. 

They point to privately owned Bellevue group and the International Schools Partnership ( which is also backed by family money) which both try to acquire and turn around less lucrative businesses. “But those that can be turned around are a vanishingly small number and the space has become more competitive.” 

Another potential issue, they claim, is that Inspired is “quite a rag bag of locations and different types of schools globally. It doesn’t seem to have a unifying vision apart from the goal of building an international private schools group.” 

Indeed, the dispersed nature of the group seems to generate doubts among others. “The question is how do you manage something that is so spread out from the UK to Africa and South America,” one asks. “It is hard having schools all over the place and managing them well, but in my opinion focusing on acquiring schools in Africa and the UK is the right thing to do.”

Realistic growth

The source suggests a sensible strategy for Inspired would be to focus on improving margins of acquired assets rather than buying more sites in the hope of taking on the bigger players. But Nsouli says he is realistic about the firm’s growth prospects.

“We are not going to multiply ebitda by 6.5x times again, that would be hard to achieve.” He is also optimistic about growth and says that “getting to €100 million ebitda in the near future whilst maintaining our quality and entrepreneurship is definitely achievable”.

Inspired will continue to focus on existing markets and will expand further in Europe through acquisitions this year. Joining its portfolio will be St Louis School in Milan, the International School of Europe group in Milan, Modena, Monza and Sienna, and  St John’s International School in Belgium.

Nsouli also says he is interested in doing things in education outside of schools, such as launching tertiary colleges or business schools “to replicate what we have done with private schools. Similar to Inspired’s model, we will either acquire existing brands or build our own through a buy and build strategy,” he says.

While Inspired has been delivering impressive growth, analysts say it needs to be careful not to overreach itself. Nsouli’s ambitions are undimmed, though, and it’s clear he has big plans for the future. Given the long-term capital he has behind him, his rivals in the international schools space will be watching Inspired’s progress closely.

Kirsten Noben