VARSITY ADMISSIONS AN EDUCATION BLOG

Why Investors Are Buying Up Schools

Who owns your school? Sure, a group of administrators and your principal run it. But, whom do they report to?

Recently, the private-equity-backed firm Meritas – owned by Sterling Partners – purchased Claremont Preparatory School, a six-year-old private school in Lower Manhatten, according to an article in the New York Times. (Sterling Partners also owns Sylvan Learning Centers, a chain of tutoring centers).

Claremont Prep’s tuition is $34,650 for next year.

Meritas is not the only for-profit company to purchase private schools, and this is a growing trend. These companies are buying struggling private schools (mostly high schools), in hopes improving their quality and turning a profit.

The private school sector is growing as upper-class families are looking for the best-possible education, despite cost. But, starting or turning around a private school is very costly, and in some cases only well-funded, private-equity-backed companies have enough resources to purchase or start private schools. Private companies diving into the education business is a fairly new trend; however, experts believe that this trend will skyrocket in upcoming years.

Many expect these for-profit companies to bring their same upper-level management and strict cost-cutting business approaches to schools, which would be drastically different from how they currently operate.

However, Meritas has turned a profit at each of the other nine schools it owns and operates without strictly cutting costs.

Some parents at Claremont Prep were relieved that the school was purchased because it was not meeting many of its goals under its past administration. Claremont Prep built a luxurious, 325,000 square foot campus with expensive buildings, hoping to boost attendance to 1,000 students by 2007. However, the school only has 522 students as of 2011, meaning that many of its facilities are unoccupied.

Leadership has also been an issue at Claremont with four different heads in six years.

Mac Gamse, the chief executive officer of Meritas, said his company would not make any major changes to Claremont right away. However, he plans to immediately create a “cohesive curriculum” and improve the school’s guidance counseling.

Meritas still has a commitment to make a profitable return for its parent company, Sterling Partners.

“Parents want the reputation of their schools to grow,” said Gamse. “As that happens, the value of the school grows.”

Meritas has had success at the other schools it owns. Meritas increased enrollment 29% over four years at the Village School in Houston, and it has increased enrollment 8% at College du Leman in Switzerland since 2006.