The VATC deal and the rise of domestic investors.

DoanhNhanOnline – With 15 years of operation, the International American Education Organization (IAE) is one of Vietnam's leading private education institutions, with the familiar VATC brand. After two changes of ownership, IAE is now in the hands of domestic investors. Will they be able to make a difference with IAE?

Mergers and acquisitions in the education sector don't attract as much attention as those in finance, banking, food and beverages, or real estate. However, news that the US investment fund, Black Horse Asset Management (BAM), recently sold its controlling stake in Institution of American Education (IAE) to a group of Vietnamese investors, including shareholders from TNK Capital, EQuest Education, and Ismart Education, has generated positive buzz. The transaction value wasn't disclosed, but according to some informed sources, it was lower than IAE's equity stake (approximately $10 million).

Startup phase: Red and Green
The American Education Organization (IAE) is a reputable entity in the private education sector, owning two well-known brands: VATC and Broward College Vietnam. In the field of English language education and vocational training, it was once a prominent name. IAE was first established in 1999, primarily focusing on English language training under the VATC brand (Saigon residents often referred to it simply as "Viet My Green" to distinguish it from the Vietnam-America English Association - VUS, which was "Viet My Red").

Since 2007, IAE has been involved in the training market. college With the establishment of Viet My College, and in 2011, the company further expanded into the international education market by establishing a branch of Broward College (USA) in Vietnam. After Vietnam officially normalized relations with the US in 1994, the English learning movement in Saigon began to flourish again. At that time, the founder of IAE, Dr. Hoang Ngoc Phan, leased the franchise of the Vietnam USA Society (VUS) to provide English training in Ho Chi Minh City. VUS is a brand of the Vietnam USA Society – a non-profit friendship organization established in 1945. However, exploiting the Vietnam USA Society's brand instead of his own had many drawbacks. Therefore, Dr. Hoang Ngoc Phan decided to establish Viet My English Company Limited and create his own brand, Viet My English (now renamed Viet My English – VATC), in 1999.

Shortly after, Mr. Pham Tan Nghia, a former associate of Dr. Hoang Ngoc Phan, leased the VUS brand from the Vietnam-America Association and operated independently from the Vietnam-America English Language Company. Thus, from 1999, Saigon had two well-known English language centers coexisting: Vietnam-America English Language Center and Vietnam-America Association English Language Center. The existence of these two nearly identical brands led Saigonese people to give them two shorter and more memorable names, associated with the colors of each brand. Vietnam-America English Language Center was called "Vietnam-America Blue" because of its light blue color scheme, while Vietnam-America Association English Language Center was called "Vietnam-America Red" because it used red.

For many years afterward, these two brands almost dominated the English language teaching market in Saigon. Viet My Xanh experienced faster growth than its contemporaries through its franchise model in other provinces and cities. By 2008, Viet My VATC had 28 English language teaching centers nationwide (with 16 in Saigon) and was the largest English language teaching group in Vietnam at that time, dominating the market in Ho Chi Minh City and the South. In addition to English language teaching, from 2000 onwards, IAE also developed a vocational training segment. By 2007, this vocational training segment was officially upgraded to Viet My College (now branded as American Polytechnic College – APC). Although it's called a vocational school, Viet My College actually relies on its core strength: its English language teaching capabilities. Therefore, the school focuses on training office-related professions such as commercial English translation and interpretation, business administration, tourism and hotel management, and information technology. Its training motto is simple yet effective:“Fluent English – immediate employment”"Viet My College perfectly captured the demands of the labor market at the time. The number of students enrolling at Viet My College increased rapidly, reaching over 2,000 students within just 2-3 years of its establishment.".

The bitter consequences of "Dark Horse"“
The period of 2006-2007 was a time of explosive growth in Vietnam's financial market. According to an education investor, at that time, a series of Vietnamese private companies emerged operating in various fields: information technology, food, fast-moving consumer goods, finance, and banking. They had the opportunity to transform from their initial "rural" appearance into modern corporations. The education sector was also a promising field at that time; however, its "growth" lagged far behind other sectors. That is why there was almost no significant investment in education companies during this period. Interestingly, IAE was an exception. In 2008, the Black Horse investment fund from the US acquired almost all of the founding shareholders' capital contributions, thereby becoming the controlling shareholder of the IAE Group. Black Horse's CEO, John Engle, saw the long-term potential of the education sector in Vietnam, which is why Black Horse invested in and acquired a controlling stake in an unlisted company, IAE, for the first time.

As a fund led by US investors, Black Horse aims to bring high-quality US education to Vietnam with the goal of dominating the market in the long term. To realize its goal, IAE soon pursued a partnership with Broward College, a public university in Florida, USA. Originally a community college, Broward College is a shining star of Florida's public university system and was officially authorized by the Florida State government to become a four-year undergraduate university in mid-2008. According to John Engle, the school has been recognized as one of the top 10 community colleges in the US for many years by the Aspen Institute, a leading US educational research institute located in Washington D.C., led by two former US Secretaries of State, Dr. Madeleine Albright and Professor Condoleezza Rice.

The partnership between IAE and Broward College in Vietnam is a pioneering model, in which Broward College directly manages the quality of training and degree awarding. Because Broward College is a non-profit public institution, making money is not the primary goal of this program. Therefore, the quality of teaching at Broward College in Vietnam is the number one priority and is very strictly managed. Consequently, this is considered the best and most challenging American-style training program in Vietnam to date. Black Horse's ambition to build a high-quality American education in Vietnam is not wrong, but their game has not been smooth sailing. According to the aforementioned education investor, while IAE focused on building Broward College Vietnam, the English language teaching industry became more competitive than ever with a host of new rivals such as ILA, Apollo, British Council, EQuest, not to mention hundreds of other smaller centers. "This significantly shrinks the market share of VATC Vietnamese-American English, despite their strong and long-standing brand," this investor commented.

Another factor that negatively impacted IAE at the time was that its Viet My College system, which had just reached a sufficient scale to be profitable (3,500 students), was being negatively affected by a series of new government education policies. According to Dr. Le Thi Thanh, Principal of Viet My College, the most significant were the policies restricting university transfer and the removal of minimum entrance scores for universities. Dr. Thanh explained that Vietnam, traditionally a society that values academic degrees, now has wider access to universities for young people. However, many people are willing to do everything possible to get their children into university, even a low-quality private university, rather than send them to college, even a high-quality one. This is not to mention the difficulty of transferring from college to university: either they have to retake the university entrance exam, or they have to work for three years before they can transfer. Therefore, these two policies unexpectedly narrowed the market share of all colleges and vocational schools nationwide, according to Ms. Thanh. Viet My College also suffered the same fate as other schools. college This is different when they face much greater difficulties in terms of student recruitment.

In the field of high-quality education in the United States, Broward College Vietnam struggles with dozens, even hundreds, of "joint programs" that have sprung up like mushrooms in Vietnam. These joint programs all "label" themselves as American, British, Australian, or Singaporean, but most partner with online private universities, unknown or unaccredited schools, or even diploma mills. "Their advantage is low tuition fees, very lenient admission and graduation requirements, and they capitalize on the Vietnamese people's emphasis on university degrees. Meanwhile, Broward College has very strict English language requirements for admission and graduation," said Dr. Le Thi Thanh.

Meanwhile, parents and students are largely unable to distinguish between high-quality, accredited training institutions and low-quality, unaccredited ones. The problem is that all these institutions are licensed to operate in Vietnam by the State, but to date, the authorities have taken no action to guide or direct students regarding the quality of each training unit. As a result, many training institutions display "high-quality" certificates, but the quality of education is very low, even causing many negative consequences that have been reported in the press.

The comeback of domestic investors.
This reality left Black Horse, after nearly six years of managing IAE, showing signs of fatigue. At the end of 2013, the investment fund sold the majority of its stake in IAE to a consortium of Vietnamese investors from TNK Capital, EQuest, and Ismart. The value of the transaction was not disclosed by the parties involved; however, according to informed sources, the figure was approximately equal to IAE's equity value at the time of the transaction. This means Black Horse accepted a "loss" and officially withdrew from the competitive education market in Vietnam, despite its model being superior to many competitors. IAE's future now rests in the hands of this new group of investors, who are no strangers to the education sector.

One of the shareholders is EQuest, a leading company in English language teaching and study abroad consulting in Northern Vietnam, and almost exclusively specializing in high-end SAT, TOEFL, IELTS, and TOEIC test preparation in Hanoi. Ismart Education is a pioneer in digital solutions for education from preschool to university. The CEO of IAE, Dr. Dam Quang Minh (one of the new investors), was formerly the Director of the Vocational College Program at FPT University (FPT Polytechnic). He played a key role in transforming FPT Polytechnic from a humble beginning into one of the most prestigious colleges in Vietnam with over 6,000 students nationwide.

Could the experience of domestic investors be the key to IAE's turnaround, allowing it to return to its golden age as one of Vietnam's leading private education corporations, as it was in 2008? It's worth recalling that during that period, VATC surpassed its biggest competitor in the same segment, VUS. For example, in 2008, VATC English (VATC's English classes) had a total of 283 franchised classes in Ho Chi Minh City alone. When VATC declined, VUS seized the opportunity to rise strongly, causing VATC to lose its number one position. Clearly, the current landscape of education investment is much more challenging and harsh than it was six years ago. According to Dr. Nguyen Quoc Toan, founder of EQuest and now Chairman of the Board of Members of IAE, the game has changed, but the buyers of IAE have also thoroughly researched and fully prepared their "weapons" for the big battle ahead. "We are trying to bring VATC back to its golden age within the next 3-5 years," said Dr. Toan.

According to Dr. Toan, the English language teaching market still has much potential. There are many ways to compete in this market, such as investing in facilities, image and brand, the quality of the teaching staff, teaching technology, and customer service. He affirmed: "IAE only invests moderately in facilities because this is a never-ending race in terms of cost. Instead, we invest in the quality of our teaching staff, technology, and customer service.".

Dr. Dam Quang Minh, CEO of IAE, said that VATC Vietnam-America English Center is preparing to implement digital lecture technology and smart classrooms at all its branches. Students will learn in an interactive environment with lectures designed on vivid 2D and 3D graphics. “The majority of VATC Vietnam-America English Center students are in primary and lower secondary school, an age group where abstract thinking is not yet strong. These digital contents will help learners experience a real interactive environment, thus greatly increasing their ability to grasp the lessons,” Dr. Minh shared.

Regarding the strategy of the Viet My College system, Mr. Minh revealed that the school will focus on two key areas: English proficiency and job opportunities from the first year. All students at Viet My College will receive free English lessons throughout their studies at VATC English centers. Professionally, the school is actively preparing to implement the BTEC program (a national college program from the UK, currently implemented by many universities in Vietnam such as the National Economics University, the Banking Academy, the University of Economics Da Nang, the University of Technology and Education Ho Chi Minh City, and Nguyen Trai University). The school will also establish a career advisory board, including leaders from many large businesses in Vietnam. IAE stated that they will strive to arrange internships for students early on, starting from their first year of study, with internships interspersed throughout their time at the school, and provide continuous support until they find employment.

Regarding Broward College's branch in Vietnam, another division of IAE, Dr. Susan D'Aloia, Head of the English Department, believes that generations of graduates from Broward College Vietnam will be "living proof" of the branch's teaching quality. In an email interview with Doanh Nhan magazine, she said: "What we need is time, because proving a good educational service cannot be done hastily; it must rely on graduates." Currently, many Broward College graduates are beginning their studies at prestigious universities in Australia, Canada, and the United States. Others have started working immediately after graduation at major companies such as Six Senses, Park Hyatt, HSBC, and Atlantic Commodities.

With another transformation, IAE seems poised to rise again and prove its long-term value. The challenges will be immense after the change of ownership, but IAE's CEO, Dr. Dam Quang Minh, remains confident: "We possess international knowledge and experience, as well as expertise and understanding of local education, so our strategy for IAE is to seize and lead the revolutionary educational trends taking place worldwide. We are confident that we will succeed.".

The arduous return of the IAE to its former status has begun.

Thanh Trung

See more here: http://doanhnhanonline.com.vn/thuong-vu-vatc-va-su-soan-ngoi-cua-nha-dau-tu/

Author: Viet My College - Date written: April 17, 2014

Category: Training, The media talks about us.