Dive Brief:
- Universal Technical Institute has agreed to buy Concorde Career Colleges in a $50 million deal, it announced Tuesday, making a move into healthcare programs as it seeks to grow revenue and diversify its postsecondary training offerings.
- Concorde, a 17-campus for-profit chain focused on healthcare education, would become a wholly owned subsidiary of Universal Technical Institute, which is a Phoenix-based transportation and technical training company with programs including automotive and diesel servicing. Universal Technical Institute expects the deal to close in the first half of its 2023 fiscal year, which begins in October.
- Universal Technical Institute executives cast the deal as a major piece of its growth strategy, which is intended to more than double company revenue by 2025 while diversifying the fields it serves. The company will be entering the healthcare education space at a time when its leaders expect the healthcare workforce to need to add 2.4 million people by 2029.
Dive Insight:
The regulatory environment for higher education has been growing stricter under President Joe Biden's administration, with many changes at the federal level putting pressure on for-profit institutions. Earlier this year, the U.S. Department of Education unveiled a policy making private college owners financially liable in situations like their students requiring loan forgiveness. The department also reached consensus on changes sharpening the 90/10 rule, which prohibits for-profit colleges from receiving more than 90% of their revenue from federal student aid.
But higher ed was already being reshaped by a series of acquisitions and conversions. Some large for-profit chains and operators have sought nonprofit status to avoid some regulatory effects, while other companies are moving on acquisitions to add scale, diversify their program offerings and draw revenue from a wider range of sources.
Universal Technical Institute was on the list of buyers even before it announced its new deal Tuesday. Last year, it closed on an acquisition of MIAT College of Technology, adding two campuses and programs including aviation maintenance, wind power and welding.
The deal announced Tuesday calls for Universal Technical Institute to pay $50 million in cash to buy Concorde from Liberty Partners, a private equity firm that acquired the career colleges in 2006. The deal is subject to regulatory approval, including from the U.S. Department of Education.
About 7,400 students enrolled across Concorde's campuses at the end of 2021, and it recorded about $180 million in revenue.
Universal Technical Institute reported just over $335 million in revenue for its 2021 fiscal year, which ended in September. Net income totaled $14.6 million for the year.
Company leaders say the acquisition will help them grow, estimating it will help to push 2025 revenue above $700 million. When the deal closes, the company will have 20,000 students at 31 locations across 14 states.
"We take the responsibility of becoming one of this country's leading workforce solutions providers seriously, and entering the healthcare space allows us to help even more students and support employers as they seek to solve some of their toughest workforce-related challenges," said Jerome Grant, Universal Technical Institute's CEO, in a statement.
Universal Technical Institute also touted the acquisition's student demographics and regulatory metrics in a presentation for investors. The overwhelming majority of Universal Technical Institute's students are men, but the acquisition is expected to make more than a quarter of its student body women. And it touted the possibility of adding alternative student funding models that could cut its dependency on Title IV federal student aid programs.
A majority of Universal Technical Institute students use federal funding to pay for their education, the company has said in public filings. About 68% of its revenue came from Title IV funds in 2021, with another 14% drawn from veterans benefits programs.
The company listed its reliance on federal funding as a potential risk factor in its 2021 financial statement.
"The financial aid and veterans benefits programs are subject to political and budgetary considerations," the statement said. It also noted that the Education Department and other regulators have stepped up enforcement actions.
In addition to having programs that operate under its own name, Universal Technical Institute operates the Motorcycle Mechanics Institute, Marine Mechanics Institute, NASCAR Technical Institute and MIAT College of Technology brands.
