A New Giant in Brazil

Anhanguera Educacional Participações S.A. and Grupo Kroton Educacional S.A. will merge, and constitute the largest educational group in the world.

September 10, 2013

Brazil has the world's 7th largest Gross Domestic Product (GDP), with a population of around 195 million inhabitants, distributed in 27 states (more than five thousand cities). The country has a peculiar higher education system, with a relatively small number of public research universities and a large number of private institutions, both philanthropic and for-profit. Although the system has been growing substantially in the last 15 years, the number of young people attending the university has not exceeded 14% of the 18-25 age cohort eligible to pursue university level study. Approximately 6 million students attend a higher education institution in Brazil— 75% of these students are enrolled in private institutions (approximately half of them are for-profit institutions).

Following an international industrial trend, two of the largest institutions recently announced a merger, something that will certainly have a huge impact not only in Brazil, but also on the international landscape. Apparently, the fusion of “Anhanguera Educacional Participações S.A.” and “Grupo Kroton Educacional S.A.” will constitute the largest educational group in the world, with a projected market value of around 6 billion US dollars. This would be the double that of China’s “New Oriental”, estimated to have a market value of around 2.9 billion USD.

If the merger is approved by the Brazilian regulatory agency, the enrollment will be rather impressive: 287 thousand students at the primary and high school levels and one million students in higher education. The new group will own 804 schools and 123 campuses around the country in more than 500 cities. In addition, they will have 687 centers for providing distance education. They will be more than two thousand programs at the undergraduate and graduate level including PhDs and an estimated total staff of 32 thousand individuals.

This merger will be account for approximately 45% of the enrollment in the for-profit sector. Obviously, there are many concerns about this trend in education that focuses on profit for shareholders and investors. The future CEO of the group (Rodrigo Galindo) claims that they will never put financial goals ahead of academic objectives, despite their entrepreneurial vision. However, lessons from other sectors have shown that in most cases the appetite for short-term financial gain beats longer-term objectives and this should cause concerns for educators and policymakers. Furthermore, to date the quality of for-profit higher education is dubious, with several problems related to infrastructure, faculty qualification and instability. Also, most of the programs offered are those that require minimal infrastructure and focus on humanities, law, pedagogy, and administration.

The impact of this new giant in the educational sector is still uncertain. Will small schools and universities be able to compete and survive?  How will local needs be accommodated in this scenario? Is the group planning an expansion to the rest of Latin American or beyond? How will the government deal with the evaluation and regulation of such big players on the higher education landscape? There are many questions that are now being confronted in Brazil, and the world must keep an eye on what is happening here, because it is certainly a harbinger of a worldwide trend.


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