The number of deals in the education sector is surging, even in the face of COVID-19 and a sharp drop in the number of investments originating out of China. And while the average deal value has stabilized since 2018, there has also been a significant number of so-called “megadeals,” or those valued at more than half a billion dollars.
Investment in core education has dropped due to the pandemic, but the education sector more broadly is proving to be highly defensible. Investors have shown their confidence in the attractiveness and reliability of education assets — from education services and corporate training to test prep and tutoring — by more than doubling their spending in 2020 over 2019. Meanwhile, since 2019, the number of deals they’ve done has more than doubled as well.
And as those investments make clear, adoption of digital is transforming the industry. An estimated 50% of investments in the sector have been in education technology, or “edtech,” as key sub-segments including tutoring and test prep as well as corporate trainings saw the highest rate of digital adoption in 2020-21. There is also ample room for consolidation. Not only are the core education sectors (i.e., K-12, higher education, etc.) highly fragmented, with, for example, the top 10 international school groups accounting for more than 20% of the total international K-12 market, so are newer sectors like edtech, as established incumbents get disrupted by startups mushrooming across regions.
Since the COVID-19 pandemic began in 2020, investments in education have risen to record levels, with North America accounting for 40% of them. India, meanwhile, accounted for some 17% of both tech and non-tech education investments in 2021, four times greater than in 2018. China, on the other hand, saw its share drop dramatically in 2021, falling an estimated $8.8 billion as a result of regulatory issues. But the number of megadeals hit its highest level ever — rising to 16 in 2020 and 14 in 2021.
In 2020-21, many of those deals took place in education services, corporate training, and test prep and tutoring. Large investments in direct-to-consumer supplementary ed (i.e., tutoring, test prep, ELT) have been especially focused on emerging markets; for example, test prep, tutoring and enrichment (TTE) accounted for more than half of the emerging markets’ deal value. In developed markets, the growing demand for professional upskilling and transferrable skills across industries combined with increased competition in the domestic job markets led to adult training making up a significant chunk of the deals in developed markets. But higher education platforms accounted for the lion’s share (75%) of investment across developed and developing countries alike.
Going forward, there are six reasons to be bullish about the education sector:
Emergence of regional K-12 school chains at a global level — There are multiple global K-12 platforms that have demonstrated scale and are growing rapidly.
Rebound in international student enrolment — Global mobility is starting to come back, with pent-up demand is fuelling growth in the U.S., Canada and the UK, with Australia likely to recover soon.
Disruption of mass education institutions by online higher education — Online education is growing anywhere from 5% (U.S.) to upwards of 50% (India), and some 50% of total investment in non-traditional educations segments in 2020 and 2021 was centered around technology.
Readiness for out-of-school reinforcement to be disrupted by online — Online test prep and tutoring’s adoption in developing markets is on the rise, driven by increasing acceptance on the part of parents and a preference for blended after-school learning.
Spiking demand for new-skilling, upskilling and reskilling — Growth in the use of technology across sectors is fueling a huge spike in demand for new and/or updated skills training.
Enablement of individualized learning and improved outcomes by technology — In developed nations, education services in both K-12 and higher education continue to grow rapidly.
As countries around the global continue to emerge from the worst of COVID-19, investors are making education — in particular education services powered by digitalization — among the world’s most attractive sectors. Please download our analysis for more details.