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Reference no. 113-014-1
The Brazilian post-secondary education market is a perfect example of an extremely fragmented industry that changed rapidly, notably upon the intervention of private equity funds. In 1996, a Brazilian law changed the private investment environment for educational institutions. This measure boosted market growth, and lead to the emergence of a high number of small institutions, resulting in a fragmented market with more than 2'000 private institutions in 2007, and with the top 20 private post-secondary institutions accounting for only 24.5% of enrolled students. The investment of Advent International in the public company Kroton Educacional SA marks a switch from a growth to a consolidation play on this market and illustrate the consequences of this change in terms of strategy, management and financial structure. In fact, Advent's investment is a case of a buy-out without leverage: it is a private investment in a public entity (PIPE), through a debt-free holding. This PIPE, originally designed as a mix of growth and buy-out investments evolved towards a mix of build-up and turn-around strategies (hence the title of this case).