Dusseldorf Bertelsmann takes over the majority in the Brazilian education service provider Afya for 161 million US dollars (equivalent to almost 153 million euros). The media, service and education group announced this on Thursday.
The family business is also planning to acquire more shares, according to company circles. It was only in the summer of 2021 that the Gütersloh-based company invested 500 million euros in Afya, which is listed on the New York technology exchange Nasdaq.
The company is considered the leading provider of medical education and training in Brazil. Medical students can be trained at 13 private universities. And practicing doctors from more than 1000 partner clinics use Afya to further their education digitally or to manage their work via the company’s software.
The turnover was the equivalent of 270 million euros. Earnings before interest, taxes, depreciation and amortization (Ebitda) was 120 million euros. With a margin of more than 40 percent, the business is highly profitable.
With the investment, the New York-based subsidiary Bertelsmann Education Group now holds 57 percent of the voting rights in Afya. So far it was 46 percent. Taken together, the investments are among the largest in Bertelsmann’s company history to date. Kay Krafft, who is head of the Education Group, will be the new chairman of the Afya supervisory board. “We still see enormous growth potential in Afya,” Krafft told Handelsblatt.
The acquisition fits into Bertelsmann’s strategy and future program called “Boost 2025”. At the end of March, when presenting the annual figures, CEO Thomas Rabe confirmed that he wanted to invest more in the high-margin and high-growth digital health business.
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The Gütersloh-based group had already participated in the development of Afya in 2014 and had members on the supervisory board who helped the founding family with the development. The company went public in July 2019. Since then, the share price has fallen by 40 percent to just under 14 US dollars. Revenues, on the other hand, have more than doubled, and the number of students has tripled to 16,000. On average, 250,000 people use digital training every month, compared to 10,000 in 2019.
Brazil growth market
Bertelsmann joined Afya because CEO Raabe had identified Brazil as a growth region alongside China and India. With a population of 213 million, Brazil is a huge market with uniform nationwide regulations on health issues – this makes it easier to develop training and further education offers, as does the uniform official language, Portuguese.
“Employees and students there are more willing than in Europe to pay for further education and training at a private university,” says Krafft. That costs: At Afya, students have to pay the equivalent of around 1,700 euros in tuition fees per month.
“We see further, enormous growth potential in Afya,” says the Bertelsmann manager.
But: In Brazil there are only 2.5 doctors for every 1000 inhabitants; in Germany it is 4.3. “The country has a lot of catching up to do,” explains Krafft. The number of employees in the Brazilian healthcare system is likely to grow at an above-average rate – which promises quick profits for Afya and Bertelsmann.
Afya has taken over several universities in recent years. Almost 40 percent of all prospective and trained doctors in Brazil are now studying at the educational company’s facilities or using the company’s software offerings.
According to the company, there are eight applicants for a place at the university. Afya offers the same teaching program at all locations. This not only ensures a standard, it can also be scaled quickly. The digital further training offers can also be extended to other clinics without great financial effort.
Proceeds with service software
Afya is increasingly making money with service software that is related to its core business. For example, the company offers programs that doctors can use to manage appointments or make bills. A digital reference work is also part of the portfolio. The prospective doctors come into contact with these programs even during their studies.
Founder Nicolau Esteves, who still holds around 20 percent of the shares with his family, says: Bertelsmann can provide further content-related impetus by focusing on digital education in healthcare. Co-CEO Krafft plans to integrate more universities into the Afya curriculum and wants to expand the software offering. In addition, the service provider intends to promote cooperation with pharmaceutical companies so that they can better present their products to clinics, for example.
Initially, Krafft wants to expand within Brazil and the USA. An expansion towards Europe could only happen in a few years. In the 27 EU countries, the requirements and regulations are more fragmented, and employees here spend less money on further training.
Krafft has been head of the Bertelsmann Education Group since it was founded in 2015. Previously, he was a member of the management board of the music company BMG, which also belongs to Bertelsmann. He was jointly responsible for the fact that BMG developed from a start-up to the world’s number four in the industry.
The 51-year-old now lives in the United States with his family and is also the head of Relias, a provider of online training for nursing staff in the United States. Relias follows a concept similar to Afya and also belongs to Bertelsmann. Relias customers include more than 11,000 healthcare facilities and 4.5 million workers. Relias is also growing rapidly and is highly profitable.
CEO Rabe describes the recent investment in Afya as a “further strengthening of the Bertelsmann Education Group”. In the medium term, this should now generate annual sales of more than one billion euros and an Ebitda of 500 million. In total, Bertelsmann achieved annual sales of 18.7 billion euros and a profit of 2.3 billion euros in the past financial year.
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