EFG Hermes forays into KSA with new education platform: Last week, our friends at EFG Hermes made a play for the Saudi market with the launch of their USD 300 mn Saudi Education Fund (SEF). The platform has already inked a definitive agreement to acquire regional K-12 operator Britus Education, sinking its teeth into seven schools across the GCC run by the operator. SEF seeks to replicate the company’s efforts in Egypt of creating a full-fledged service provider in the K-12 education sphere. EnterpriseAM sat down with EFG Hermes Co-CEO Karim Moussa (LinkedIn) to discuss the SEF’s vision and goals as well as the opportunities and challenges that the Saudi market presents.

EnterpriseAM: Could you tell us more about what prompted EFG Hermes to launch the Saudi Education Fund?

Karim Moussa: The initiative was driven by our success story in Egypt of building one of the strongest operators in the country — Egypt Education Platform (EEP). The platform has now aggregated around 25 assets, including 23 schools and pre-schools, Selah El Telmeez, and a transportation business.

We've noticed that on the regional scale, and particularly in Saudi Arabia, there’s a lot of demand for such operations. Saudi Arabia’s 2030 vision is expected to usher in very strong growth in the education space, specifically in the private sector. The expectation is that the student population in the private sector will double from almost 1 mn today to 2 mn by 2030. Thousands of schools are needed to accommodate that population growth and the influx of expats. Riyadh alone will need 6k schools by 2030. So given our strong operations in Egypt and our know-how as a private equity team in aggregating schools and expanding, the Saudi market presented a compelling opportunity.

The decision to launch SEF was also fueled by the interest of our investors. EEP’s investor base consisted mostly of GCC investors. As a result, we received strong support from existing investors for our plans. This isn’t your typical private equity story of, “Oh, let's just start a fund and enter a new market.” The move was really driven by our success story in Egypt and the strong operator that we've built here.

E: What does the competition look like in the Saudi education market and what opportunities are present?

KM: The Saudi market is highly fragmented, with the top eight largest education players controlling a market share of around 20%. So there’s a significant opportunity for consolidation. And the market dynamics are very similar to Egypt’s. Both countries have low private school enrollment rates — around 10% in Egypt and 14% in Saudi Arabia. The majority of students attend state-run schools in both markets.

At the same time, there’s a lack of centralization within KSA’s K-12 system. A lot of the schools that we see work in silos — meaning each has its own management teams for IT, HR, procurement, and other functions. By contrast, EEP has a centralized management team of 60 people that oversees all assets, streamlining operations and avoiding duplication. We’ve left the schools with a very thin admin position alongside the principals and teachers. That's the model that we are implementing now in Saudi Arabia. We intend to create a central operator backed by the experience and knowledge that we've gained in Egypt over the last five years.

There’s also an opportunity to export some of our homegrown brands, seeing as they would suit the Saudi market. For example, Hayah International Academy leans conservative, offers strong religious studies and Arabic programs, and boasts some of the top IB scores regionally. There's a lot of potential for a brand like this to grow outside Egypt. We own a portfolio of brands that have strong export potential like Hayah.

E: When do you expect SEF’s acquisition of Britus Education to wrap up?

KM: The acquisition is expected to close within the next few months. We've signed a binding, definite agreement. Once all approvals are secured, the transaction will be finalized.

SEF has already raised nearly half of its USD 300 mn target. For reference, EEP is a USD 150 mn fund.

E: What challenges have you faced in entering the GCC or expect to face moving forward?

KM: I think the main challenge is understanding the local characteristics and needs of each market, including the specific nuances within Saudi Arabia, such as the distinctions between major cities like Riyadh and Jeddah. Granted, we all speak Arabic, we have vastly similar cultures, and an IB or American offering would be largely the same, but there are some local differences. We studied the Saudi market for two years before entering. And when we entered, we chose to invest in existing schools and management systems rather than starting from scratch, an approach that gives us a strong foothold in the market.

E: What are SEF’s investment plans? Will it be investing in more platforms like Britus Education?

KM: Our strategy rests on two main pillars. One is very similar to what we've done in Egypt: Acquiring established, well-known brands with significant growth potential and expanding them across the country — like we did with Hayat, for instance. And the other strategy is looking for schools that require operational improvements and enhancing their service quality.

E: Do you have any plans for scaling up SEF’s capital beyond USD 300 mn?

KM: The size and potential of the Saudi market call for much more than this amount. We’ll see how things go, but it’s quite possible that we’ll scale up the fund.

E: What are EFG Hermes’ plans for expanding in the education sphere in Egypt, Saudi, and the GCC?

KM: There's strong organic growth within our existing capacities in Egypt. We are growing at a 40% y-o-y rate. In Saudi Arabia and the GCC, we will continue looking for targets to aggregate successful brands that we can grow — schools that need our help operationally.

E: Are there plans to expand to other countries?

KM: We're also looking at Iraq for opportunities in the education sphere.

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