{"id":617606,"date":"2024-03-25T00:00:00","date_gmt":"2024-03-25T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/efg-hermes-is-launching-a-usd-300-mn-education-fund-for-saudi-arabia-in-2024\/"},"modified":"2024-03-25T00:00:00","modified_gmt":"2024-03-25T00:00:00","slug":"efg-hermes-is-launching-a-usd-300-mn-education-fund-for-saudi-arabia-in-2024","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/efg-hermes-is-launching-a-usd-300-mn-education-fund-for-saudi-arabia-in-2024\/","title":{"rendered":"EFG Hermes is launching a USD 300 mn education fund for Saudi Arabia in 2024"},"content":{"rendered":"

A look at EFG Hermes\u2019 plan<\/strong>ned education platform in Saudi Arabia: <\/font><\/strong>EFG Hermes is launching a USD 300 mn education fund in Saudi Arabia this year, replicating its successful model with the Egypt Education Platform<\/a> (EEP) here in Egypt, EFG Hermes Co-CEO Karim Moussa told Enterprise Egypt. We recently sat down with Moussa to discuss EFG Hermes\u2019 plans for the fund, and why the investment bank decided to move into the Saudi market with its second education fund. <\/p>\n

Refresher:<\/strong> Launched in 2019, EEP Is an education management firm that counts EFG Hermesand the Sovereign Fund of Egypt among its anchor investors. EEP is now the largest education platform in Egypt, having raised USD 150 mn from a group of investors primarily in Saudi Arabia, the UAE, and Egypt. Today, EEP has deployed the entirety of the fund, and has aggregated 23 assets across schools, nurseries, and others. It owns a network of schools and nurseries as well as majority stakes in academic content provider Selah El Telmeez<\/a> and Option Travel, which offers student transportation. <\/p>\n

EEP has done well since its launch:<\/strong> In EGP terms, the investment cost was EGP 2.5 bn overthe past five years. This academic year, EEP expects to make EGP 3.5 bn of revenues and over EGP 1 bn of EBITDA, Moussa told us. <\/p>\n

The new fund \u2014 named the Saudi Education Platform (SEP) \u2014 will be double the size of <\/strong>EEP<\/strong>, Moussa told us. EFG Hermes currently has a pipeline of investments that exceeds the size of that fund, Moussa said. \u201cOn the fund level, we\u2019re happy to say that a big chunk of our existing Saudi and Emirati investors are very excited about our thesis and are subscribing,\u201d according to Moussa. <\/p>\n

The timeline:<\/strong> EFG Hermes expects a first close on the fund during the second half of the year,with the final close expected next year. The investment bank plans to begin deploying the fund \u201cvery soon,\u201d probably in 2H 2024, Moussa said. \u201cWe\u2019re already on due diligence with a few potential investments,\u201d Moussa said, but declined to provide names of the target investments. SEP plans to kick off in Jeddah and Riyadh with a combination between new and existing facilities, Moussa told us. <\/p>\n

EEP has a blueprint to follow from Egypt \u2014 with nuances to cater to the Saudi markets: <\/strong>At EEP, EFG Hermes created a central team run by Ahmed Wahby and his team, which is a unique model in Egypt. This provides all portfolio schools with central services, including procurement, HR, and IT. The schools are run with just the principals and very slim admin teams, which makes running them very efficient. \u201cThe EEP case study is quite relevant, and with the lessons learned in Egypt, we have several types of models \u2014 sometimes we own the land and real estate 100%, sometimes we enter into partnerships with the family that owns the schools, and other times we lease the land and real estate, or we only enter as a management team,\u201d Moussa said.<\/p>\n

How the student markets compare:<\/strong> The Egyptian student population is roughly 22 mn students, the lion\u2019s share \u2014 around 90% \u2014 of which attend public schools, with the remainder attending private schools, according to Moussa. Saudi Arabia is the second-largest market in the region with a student population of 6.5 mn, 85% of which attend public schools and roughly 15% attend private schools. That translates to roughly 1 mn students across 8k private schools, Moussa explained. Students attending private schools are primarily expatriates, but the local population is also raising the demand and standards for education, he said. <\/p>\n

In Saudi Arabia, there\u2019s a gap in the middle segment of the educational market:<\/strong> The market currently has very expensive international schools, which diplomats\u2019 children typically attend, and the mass market national schools, but in the middle there\u2019s an opportunity to provide high quality education at an attractive price point. \u201cWe feel there is a nice entry point in the Saudi market, in the mid-market where we\u2019re talking about tuition fees in the neighborhood of SAR 40k-60k per year and offer high standard curricula such as IB, with a high quality school,\u201d Moussa said. EFG Hermes also sees an opportunity to replicate its combination between building new schools, investing in schools, and helping existing schools with the firm\u2019s central management philosophy. <\/p>\n

\u201cA lot of the schools that we see have been built as family businesses, and we feel that <\/strong>there\u2019s a chance for us to enter the market there<\/strong> and provide our management expertise,\u201d Moussa said. There\u2019s an operational element \u2014 EFG Hermes \u201cisn\u2019t just some private equity player entering into the Saudi market. We have very strong operations and a track record that we\u2019d like to replicate,\u201d he told us. <\/p>\n

And the market for service providers also has similarities:<\/strong> \u201cWhat\u2019s very interesting is that the top four education companies in Saudi Arabia \u2014 most of which are listed \u2014 control only 10% of the market. The market is highly fragmented, which is similar to what we\u2019ve seen in Egypt, so there\u2019s room for a new entry into the market,\u201d Moussa said. Providing high-quality, high-standard education at affordable prices is an appealing proposition, he said. <\/p>\n

There are also lots of similarities between the Egyptian and Saudi curricula<\/strong>, which iswhere a platform like Selah El Telmeez \u2014 which has also begun going digital \u2014 will come into play to help SEP create a strong curriculum for its assets in Saudi Arabia, Moussa said. <\/p>\n

T<\/strong>he Saudi government has been very welcoming of EFG Hermes\u2019 entry into the market:<\/strong> \u201cWe\u2019re spending a lot of time on creating deep Saudi content to run with Saudi management,\u201d Moussa said, stressing the importance of creating a bespoke formula that caters to the local market. <\/p>\n

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