Industry Update

The recession has proven to be a major boon to the post-secondary for-profit education industry. The Simba Information Career College Index, which tracks 13 leading publicly traded operators in this industry, showed that enrollment growth was 18.1% from December 2007 to December 2008 and revenue growth was 15.2% during the same time period. There are two main reasons that the recession has driven enrollment at career colleges: (1) workers want to enhance and/or diversify their skills in order to make themselves more valuable and more marketable (2) students that would normally attend traditional universities are being squeezed financially and are opting for the lower cost education provided at career colleges.

Industry M&A Update
Mergers and acquisitions activity in the post-secondary for-profit industry is primarily motivated by two factors. The first factor is the ability to quickly expand geographically, especially because acquired schools maintain their accreditation thereby negating the need to go through the lengthy and tedious process of getting a new campus or school accredited. The second reason is to acquire a competency or quickly develop a presence in an arena that was previously neglected. For example, gaining international exposure by purchasing a school abroad or creating an online presence by acquiring a company that offers their services over the Internet.

General Economic Update

The U.S. economy continues to give mixed signals. Home re-sales in the U.S. rose in June for a third consecutive month, spurred by tax incentives, lower borrowing costs and foreclosure-driven declines in prices. Federal Reserve Chairman Ben S. Bernanke recently said he believes the worst housing slump in eight decades appears to be moderating. Additionally, stocks have enjoyed a sustained rally over the past month, recently sending the DOW past 9,000 for the first time since January. Howver, the Labor Department reported that first-time applications for jobless benefits climbed by 30,000 to 554,000 in the week ended July 18. This large increase is partially due to mid-year auto shutdowns that happen every year in order to retool for the new-model year.