Leeds Weld Picks Its Spots In the Education Hodge Podge

Although it’s been around for centuries, the private, for-profit sector of the education industry has many of the characteristics of an emerging market. As fragmented as an industry can be, it houses organizations ranging from nationwide, multi-facility training institutions to online colleges to mom-and-pop tutoring services. A handful are publicly owned; most are not. Some are hugely successful models of sophistication; others still depend on horse-and-buggy instructional methods. To New York private equity investor Jeffrey T. Leeds, the for-profit education and training field is the quintessential “inefficient” industry. But while most traditional investors might shy away, Leeds believes that the highly eclectic mix offers tempting rewards for the out-of-the box strategy being executed by his firm, Leeds Weld & Co. The firm, which celebrated its first anniversary in October, is the largest private equity group focused exclusively on investing in education and training companies. As a combination buyer, investor, company builder, incubator, and capital provider, Leeds Weld is seizing on several favorable fundamentals, including rising customer demand, an underpopulation of institutions strong enough to handle the upsurge of students, and a chronic lack of capital to finance their development. Leeds Weld’s newest partner, former Massachusetts governor William F. Weld, said that his interest stemmed from his days in the governorship when he noted that public education was finding it harder to train and educate students for a more technologically oriented modern world. “The old K to 12 model was disintegrating,” he said and schools in the private sector were stepping into the breach by supplying the services that were needed. That translates into some big numbers for a savvy investor to deal with. The $750 billion education industry is the second largest sector of the American economy, dwarfed only by health care, and, Leeds and Weld say, the for-profit portion is growing at a double-digit rate. Among the factors fueling the growth are: *The need for more advanced skills to handle technology jobs in the new economy; *The increase in employer-financed continuing education programs; *A greater commitment by more people to life-long education; *More outsourcing of corporate training programs; *A shift of students requiring more intensive skills from the public to the private sector; *Greater use of specialized tutoring and enrichment services; *A proliferation of online education and training offerings; and *Increased government funding of subsidies and loans for professional education. All of these and more are fair game for Leeds Weld as demonstrated by two recent acquisitions and four investments as its activities accelerated. Leeds acquired outright Ross University, a medical and veterinary school in the Caribbean, and Data Mark Systems, a Salt Lake City-based provider of marketing services for the education field. Leeds also took positions in Cognitive Arts Corp., a simulation-based e-learning developer; InterWise Ltd., a synchronous e-learning programs; Quisic, an online management education; and Shopforschool Inc., online school fundraising. Leeds says that many of the investments are designed to provide growth capital in an industry that historically has faced problems in raising funds through traditional sources. That, he says, is an essential ingredient in forming the strong, professionally run companies capable of offering the best programs. Good management, by contrast, is not scarce. Leeds, in fact, says he would be reluctant to invest in a company in which he lacks confidence in the management team. However, he adds, that Leeds Weld, besides bringing money to the table, often finds that it can help investees with marketing. Despite Leeds Weld’s unique approach, Leeds says it does not deviate from the typical private investor’s commitment to an exit strategy, no matter how much by may like a portfolio or investee company. “I start thinking about an exit strategy at the very time I am making the investment,” he says.