A fundamental analysis of Nord Anglia Education, Inc. (NORD) is now purely retrospective because the company was taken private in 2017.
Nord Anglia Education, Inc. was delisted from the New York Stock Exchange (NYSE: NORD) after it was acquired by a consortium led by the Canada Pension Plan Investment Board (CPP Investments) and Baring Private Equity Asia (BPEA) in April 2017 for $32.50 per share in cash, in a deal valued at approximately $4.3 billion.
The following article analyzes the company’s fundamental characteristics and financial performance leading up to its privatization, highlighting the factors that made it a compelling target for private equity.
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| A fundamental analysis of Nord Anglia Education, Inc. (NORD) |
Retrospective Fundamental Analysis of Nord Anglia Education, Inc. (NORD) Pre-2017 Acquisition
Executive Summary: The Premium Education Growth Story
Nord Anglia Education, Inc. was the world's leading premium schools organization, operating a global network of international schools. A fundamental analysis of its performance before its 2017 privatization reveals a company with strong qualitative advantages—a premium brand, a scalable operating model, and exposure to high-growth emerging markets. This foundation was supported by robust quantitative metrics, including consistent revenue and profit growth driven by rising enrollment and school fee increases. The acquisition at a significant premium underscored the perceived high intrinsic value of its integrated platform and future growth potential in the fragmented global private education market.
I. Qualitative Analysis: Business Model and Strategy
A. Company Overview and Brand Power
Nord Anglia Education operated a network of high-quality K-12 international and boarding schools across the Americas, Europe, China, Southeast Asia, and the Middle East.
Premium Positioning: The schools catered to affluent local families and expatriate communities, charging high tuition fees (e.g., up to over $50,000 annually at some top-tier locations). This premium status provided pricing power and margin resilience.
Global Integration: A core competitive advantage was its centralized, scalable platform. Unlike many fragmented school operators, Nord Anglia ran its schools as an integrated network, allowing for centralized curricula (e.g., partnerships with Juilliard and MIT), management, and capital expenditure planning. This model boosted educational quality and operational efficiency.
Curricula: The company often employed globally recognized standards like the English National Curriculum and the International Baccalaureate (IB), attracting highly mobile families.
B. Industry Dynamics: Structural Tailwinds
The global premium education sector was and remains attractive, benefiting from powerful structural trends:
Rising Middle Class: Rapid growth of the middle and affluent classes in emerging markets like China and Southeast Asia, driving demand for high-quality Western-style education.
Expatriate Mobility: Increasing global mobility of professionals requires consistent, high-standard schooling options across countries.
Low Cyclicality: Demand for premium education is relatively non-cyclical, as parents prioritize their children’s schooling even during economic downturns, providing stable cash flows.
C. Growth Strategy
Nord Anglia's fundamental growth strategy was two-fold:
Organic Growth: Increasing enrollment in existing schools, improving fee-per-student through curriculum enhancements, and leveraging the central platform's operational efficiency.
Acquisitive Growth: Strategically acquiring well-established, high-quality schools in attractive metropolitan areas globally and integrating them into the NAE platform to realize synergies and scale.
II. Quantitative Analysis: Financial Performance (Pre-2017)
The company demonstrated consistent, profitable growth leading up to the transaction, cementing its premium valuation.
A. Revenue and Enrollment Growth
Nord Anglia’s revenue growth was a direct function of both its school network expansion (new acquisitions and development) and organic performance (fee increases and enrollment).
| Metric | Six Months Ended Feb 28, 2016 | Six Months Ended Feb 28, 2017 | Growth (%) |
| Revenue (in $ millions) | $293.0 | $308.2 | +5.2% |
| Gross Profit (in $ millions) | $98.3 | $100.4 | +2.1% |
Steady Top-Line: The company consistently delivered solid single-digit to low double-digit revenue growth, underpinned by its pricing power and demand in its operating geographies.
Enrollment: Enrollment figures frequently trended upwards, supporting the revenue base.
B. Profitability and Margins
High-margin businesses were key to its attractiveness.
Gross Margin: The gross margin remained strong and relatively stable (around 33-35%), reflecting its ability to manage the costs of teachers and campus operations while maintaining premium fees.
Net Income / EPS: For the six months ended February 28, 2017, the Diluted EPS was $0.55 per share, a slight improvement over the prior year’s $0.51. The positive Net Income demonstrated the successful translation of top-line revenue into bottom-line profit, despite high overhead and significant interest expense associated with the company’s leveraged capital structure.
C. Balance Sheet and Capital Structure
As a private equity-backed company that had conducted an IPO, Nord Anglia had a highly leveraged balance sheet.
Debt: The company held a significant amount of Interest-Bearing Loans and Borrowings (totaling over $1 billion in non-current liabilities as of February 28, 2017).
Attractiveness for PE: While high debt is a risk for public investors, it is a normal feature for private equity-backed firms. The stability of the education sector's cash flows—driven by committed, upfront tuition payments—allowed the company to sustainably carry high levels of debt. This debt structure, when combined with strong EBITDA, made the company an ideal Leveraged Buyout (LBO) candidate.
III. Valuation and The Privatization Event
The privatization transaction served as the definitive valuation metric for the stock in 2017.
Acquisition Price: $32.50 per share in cash.
Premium Paid: This price represented a premium of 18% over the company's closing share price the day prior to the announcement, and a 33% premium over the 90-day average closing price.
Total Enterprise Value: Approximately $4.3 billion.
The willingness of a consortium of major global private equity and sovereign wealth funds to pay a substantial premium for Nord Anglia fundamentally validated its business model. They saw value in:
Platform Scalability: The ability to add more schools and improve operational efficiencies across a larger network.
Stable Cash Flow: The predictable, recurring revenue from tuition fees was ideal for supporting the leveraged capital structure often favored by private equity.
Long-Term View: Private ownership allows management to execute long-term capital-intensive expansion strategies (new school development and major acquisitions) without the quarterly scrutiny of the public market.
The $32.50 per share price was the market's (and the institutional investors') ultimate assessment of NORD's intrinsic value, including its strong cash flow generation and embedded growth potential.
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