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Just a few months in, Grand Canyon University’s spin-off education services company is already on the way to becoming a significant player in the online program management market.
Grand Canyon Education, a for-profit company formed when Grand Canyon University converted from a for-profit education provider to a nonprofit institution earlier this year, announced Tuesday that it would acquire Orbis Education, an OPM company focused on health care, for a cool $362.5 million.
In an intensely competitive OPM market, which some observers say has too many players and is ripe for consolidation, Grand Canyon Education's decision to acquire an existing business (and customer base) rather than try to build one makes sense.
But the price tag is notably high: Wiley Education Services paid $200 million this fall to acquire OPM company Learning House, which had 26 institutional partners and more than 460 online programs. Orbis Education, which has built a strong niche in the health-care education market, has 17 institutional partners and likely significantly fewer online programs.
Daniel Pianko, managing director of University Ventures, a higher education investment firm that has invested in health care-focused OPM Synergis Education, said the price paid by Grand Canyon “indicates that health-care assets trade at a premium.”
Orbis Education has a unique mix of university and hospital partnerships, which would be extremely difficult for Grand Canyon to build on its own, said Pianko. Additionally, online health-care programs are extremely complex and “notoriously difficult to scale because of regulators’ intense focus on quality,” he said.
The acquisition of Orbis Education is significant for Grand Canyon Education, which has experience managing Grand Canyon University's online programs but not those of other institutions. (Grand Canyon is a Christian institution that has a ground-based campus in Phoenix and a very large online enrollment.) “Going from one to 18 university partners makes them a real OPM, which is a significant move for them,” said Pianko.
Joshua Kim, director of digital learning initiatives at Dartmouth College's Center for the Advancement of Learning (and a blogger for Inside Higher Ed), said the acquisition “is a very smart move” by Grand Canyon Education.
“Orbis has established a strong reputation in the health-care education vertical,” said Kim, who wrote a blog post this summer praising the company's approach to online education. The demand for online health-care education is growing due to an “acute shortage of nurses and other health-care professionals” in the U.S., he said.
“Expanding the opportunities for people with jobs and families to access high-quality health-care training and certification through online learning will be essential if we are to fill this shortage of trained medical professionals,” said Kim.
Brian Mueller, chairman, president and chief executive officer of Grand Canyon Education, said that Orbis is an “extremely high-quality provider” that has identified “an area of real need in this country -- a shortage of health-care professionals, especially prelicensure nurses.”
“The current capabilities of universities to produce the number of nurses needed is not working,” said Mueller. Orbis Education identifies markets that have a shortage of health-care professionals, forms relationships with health-care providers and universities in that area, and invests to build training programs that help fill those jobs, said Mueller.
“It really fits philosophically with where we think higher education needs to go -- which is looking at where the economy is going, where the jobs are, where there are shortages, and creating programs that are going to help people access those jobs,” said Mueller.
If all goes to plan, the acquisition will be completed in early 2019. The Orbis Education brand will be phased out, but the company will continue to be run from its current headquarters in Carmel, Ind., with current Orbis executives and managers expected to stay in place. The company is on track to generate roughly $63 million in revenue for 2018 and is “currently financially break-even,” according to an analysis published yesterday by BMO Capital Markets.
Steve Hodownes, Orbis's chief executive officer, said in a news release that the company had been seeking a partner with “significant capital resources and cultural capability.”
“Although many companies expressed strong interest in our business, in the final analysis, Grand Canyon Education emerged as the best partner for our future growth,” said Hodownes.
But Kim said he has some unanswered questions about how the acquisition by Grand Canyon Education will impact its business. They include: how independent Orbis Education will be from Grand Canyon Education, and what will happen if Grand Canyon University has a program that directly competes with a program currently powered by Orbis.
Kim also wonders whether Grand Canyon Education will share Grand Canyon University’s Christian mission, “and if so what this will mean for existing and potential Orbis partners.”
“The decision to work with an OPM like Orbis is based largely on the degree to which schools feel like they are aligned in terms of culture, mission and values,” said Kim. “These long-term relationships between schools and OPMs require a great deal of trust. It will be interesting to see how this acquisition will impact these long-term relationships.”
