Education Investor Global Magazine features GUS founder Aaron Etingen in its March ’17 edition

Education Investor Global Magazine features GUS founder Aaron Etingen in its March ’17 edition

Going against the grain


Global University Systems has taken a commercial approach to building out an education platform.
Kirsten Noben speaks to founder Aaron Etingen about what is next for the firm

 

There is not enough cool in education,” says Aaron Etingen, founder of Global University Systems (GUS).

As a born entrepreneur fully embracing innovation, perhaps this is precisely what Etingen has been trying to change most through GUS.

“Education as a sector doesn’t naturally attract sufficient numbers of entrepreneurs, as it is very bureaucratic.  Being young and innovative can often been seen as a disadvantage, particularly in the early stages as it is very difficult to break into the market,” Etingen explains.

Almost out of nowhere, British entrepreneur Etingen founded flagship institution London School of Business & Finance in 2003. Since then, the company has come a long way expanding its offering in different segments globally. Against all odds and expectations, but full of lofty aspirations, Etingen defied his critics and built out an international commercially viable platform.

“We have  been  very fortunate  and  managed  to build an  impressive  business,  eventually  accepted  not  just by students and blue chip clients but also by academic peers,” Etingen says.

GUS was created based on the idea of building an ecosystem. LSBF is just one of its many branches with others including the University of Law – which GUS acquired from Montagu Private Equity in 2015, one of UK’s largest private colleges St Patrick’s College and German business school GISMA. Last year, it added tertiary education provider IBAT College in Dublin and online education platform Arden University to its platform.

GUS currently counts over 40,000 students and it confirms it has sales of around £212 million to May 2016 and ebitda of over £70 million. A remarkable milestone, for what is still quite a young company. “It is an impressive organisation that managed to build a profitable scale organisation platform,” one source says.

 

The future is global and digital

Perhaps one of its biggest selling points is that GUS has embraced distance learning in a way many institutions haven’t. It has already expanded its online organisation InterActive, and the focus on the online segment was once again underlined through acquiring online provider Arden University from Capella Education Group last year.

In Arden, Etingen says he spotted “a fantastic opportunity to capitalise on how students are learning today, while taking into consideration our national and international footprint”. Furthermore, the company has a strong synergy and cross- fertilisation with the rest of the group, and can benefit from the GUS’ national and international infrastructure, adds Etingen. Precisely that mix between its online learning component, the specialist business and its more generalist global offering has made GUS into a one-of-a kind platform, as it doesn’t seem to have any direct competitors.

It is also known for explicitly targeting the international student market through a bullish marketing approach but since then, has diversified its approach.  About seven years ago, 90% of the company’s student body consisted of international students but that has since been reduced to less than 10% of the student body in its UK-based institutions.

“We are very proud  of our international students  and we think of them as people who are looking to be part of the global economy,  bold to leave their comfort zone, be exposed to new cultures  and learn and gain international work experience,” says Etingen.

 

Political challenges

Whereas GUS is internationally diversified, the UK still ac- counts for over half of its revenue. Asked about the possible impact of Brexit, Etingen seems confident about GUS’s prospects and says “it is too early to judge the impact”.

Nevertheless, he is convinced London and the UK will retain its competitive edge as an attractive education market. And like there is a different side to every coin, the cheap pound has already caused a surge in demand for online courses at its institutions.

“In today’s climate it is very difficult to be able to invest and plan when it comes to student mobility markets thus we successfully innovated and today we are present in most of the key student destinations:  the UK, Ireland, Canada, US, Germany, Singapore and Malaysia. And of course we’re online, where we can scale up and down in every market,” Etingen says.

GUS certainly had its operational hiccups in the past though and it has done the firm’s reputation some damage. In 2016, The Home Office revoked its LSBF’s TIER 4 license, resulting in problems for 350 of its international students while vocational college St Patrick’s also had its fair share of problems, falling short in the QAA review last year.

Since then however, St Patrick’s College received a clean bill of health in its latest QAA report and commendation for good practice on student engagement.  The University of Law has also now become a top ranked university for student satisfaction in the 2016 National Student Survey. Furthermore, the University of Canada West and LSBF in Singapore have now turned into prime examples in terms of student compliance and reliance with regulatory standards. GUS also announced a strategic review in 2015 before the Tier 4 license debacle, which it says has had “limited operational impact on the group worldwide”. It outlined plans for the University of Law to become the sole provider of academic qualifications and LSBF is now focusing on executive and professional education.

According to a spokesperson, “this resilience came as a result of the reorganisation of operations and the diversification of brands, product portfolio and markets, which ensured the group wasn’t over reliant on international student recruitment or on the revenue generated by one single school market”.

But it doesn’t take away the fact that  in a slow moving sector dominated  by academics, GUS seems to have grown in a very commercial way and  with a robust  approach  to student  recruitment  and  marketing.  One source says that within the sector, “it has built a level perspective that turned GUS into barbarians of the gate, which cannot be aligned with academic integrity”.

When asked, a GUS spokesperson says it has shown it is possible to “reconcile business and private ownership with academic  rigour  and  positive  student  outcomes”,  adding that “from the outside it is not easy to see all the work that goes on in the background, we believe there is little factual foundation  to support those criticisms”.

That source also suggests it could probably “build more structure at the top as it could almost be said they sometimes have grown too quickly and this has created a bottleneck at the top management structure”.

Then again, GUS refutes this criticism saying it “has kept its founder-led structure” with a strong senior team, supported by a middle-management in charge of ensuring the running of its different segments.

“We’re constantly improving practices across the business, making changes where necessary and ensuring that each one of our institutions has all the support it needs in order to operate effectively and independently,” the spokesperson adds.

 

What next?

However, investors have been unfazed by any criticism. “GUS is not trying to do what everyone else does, but they are doing something much better at the expense of other areas in the sector,” another source asserts, referring to its focus on vocational training, online learning and short-track degrees. In the meanwhile, GUS’s own bullishness is hardly tempered. It has now digitised most of its programmes and it is also investing heavily in enhancing the student learning experience through adoptive learning, while also looking at other initiatives.

“We executed on strong organic growth, Greenfield projects, successfully integrated half a dozen companies and we are always on the look-out for new opportunities,” Etingen says. It is also benefitting from half a dozen new university partners, and LSBF recently won large corporate contracts with firms like PwC and KPMG to train students.

The fact that the company has grown at such a high rate organically raises the inevitable question if GUS would consider taking on further investment.  Its continued focus on innovation and digitalisation will most probably also nurture the firm’s appeal in the market.

“We are now evaluating private equity suites to build an equity story and possibly some strategic bridges,” Etingen says. “We have a preference for capital which can bring access to new technologies, brands, scarce assets and access to new markets.”

The GUS model has clearly worked under Etingen’s tenure, which is likely to convince investors. “We are still a relatively young group, but companies that have reached maturity can do fairly autonomous things such as delivering academic standards and when it comes to delivering efficiencies and distribution, we really have a superb platform to benefit from,” Etingen concludes. 

 

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