CVC Capital Partners is set to acquire Try Group, a Tokyo-based online tutoring service, for about 110 billion yen ($976 million), Nikkei has learned, a move that suggests the British buyout fund sees bright prospects in the sector in Japan.
CVC Capital plans to invest in turning Try Group more competitive as it focuses on developing and employing artificial intelligence in the tutoring service, with the view of taking it public in three to four years.
The move comes as online tutoring is growing in popularity due to the COVID pandemic. The British private equity firm’s move reflects its view that digital investment is key to the competitiveness of cram schools and tutoring agencies.
Try Group provides on-site lessons and tutoring services and maintains 1,100 locations across Japan. It has more than 200,000 tutors on its roster, accounting for 10% of the market and making it the biggest operator in Japan.
It reported some 50 billion yen ($443 million) in sales in the year ended in May, making it the second largest in the cram school industry after Benesse, a public company, and on par with Nagase Brothers, the operator of the Toshin High School chain.
CVC and Try will sign an agreement this month. CVC will acquire all the shares from current owners, including founding Chairman Osamu Hirata via a special purpose company.
Hirata and President Yurie Nitani will then provide capital to the special purpose company. Try will keep its current management team.
After the acquisition, Try will expand online tutoring services, while also investing in artificial intelligence to improve its ability to gauge students’ performance more accurately and predict entrance exam questions.
Try Group has seen its revenue steadily growing in recent years. It is one of the most profitable in the industry with its earnings before interest, taxes and depreciation reaching over 8 billion yen.
CVC has expertise in operating schools, such as Italian online university Pegaso, and will employ its knowledge to improve the operations of Try Group.
The Japanese cram school market, including tutoring services, is as big as 1 trillion yen, according to Yano Research Institute. Parents tend to be more generous in spending on their children, given the low birth rate in Japan.
The industry had been centered around in-person lessons, but since the COVID outbreak, online services have expanded rapidly. This has allowed large operators to gain market share at the expense of smaller players.
The London-based buyout group has invested in some 10 Japanese companies, including relaxation therapy service provider Riraku. Earlier this year, it acquired the personal care business from Japanese cosmetics maker Shiseido for about $1.5 billion. Also this year, CVC proposed a buyout of Toshiba, but the deal did not go through.
The article was first published on Nikkei Asia.