Education Management: goes back to IPO school

Posted Oct 2nd 2009 4:45PM by Tom Taulli
Filed under: Goldman Sachs Group (GS), Initial Public Offerings

Education Management Corp., a for-profit provider of post-secondary education, has hit the IPO market once again (the first public offering was in the mid 1990s). This time, the company has issued 20 million shares at $18 per share. The price range was $18 to $20.

Education Management owns 92 schools across the country, including organizations like the Art Institute of Pittsburgh, Brown Mackie Colleges and Argosy University. In all, there are about 111,000 students.

Interestingly enough, Education Management went private back in June 2006, in a $3.4 billion deal. The private equity sponsors included Goldman Sachs (NYSE: GS) and Providence Equity.

Despite having a strong growth record, Education Management saw an opportunity to ramp things up even more (which can be easier as a private company). Some of the initiatives included: hiring top executives, opening new locations, building out online offerings, improving marketing and finding more cost efficiencies.

So far, things are working out. In the past year, revenues increased 19.4% to $2 billion, with net income of $104.4 million.

Of course, the current rough economy is a positive for Education Management. With persistently high unemployment, more people are going back to school. No doubt, the next wave of jobs will require more sophisticated skill sets.

However, there are risk factors. For example, the federal government is giving more scrutiny to the sector and there may be new regulations. Also, competition is getting intense.

In today's trading, Education Management's shares are up 18% to $21.35.

Tom Taulli is the author of various books, including The Complete M&A Handbook.

Tags: Education Management, EducationManagement, gs, inthenews, IPOs