UNIGRANRIO Acquisition: Key Details, Impact, and What Comes Next

Afya Limited's acquisition of UNIGRANRIO marks a significant milestone in the medical education sector. By integrating UNIGRANRIO's esteemed programs, Afya enhances its capacity and market presence, adding 308 medical school seats. This strategic move is poised to bolster Afya's educational offerings and drive growth, reflecting the company's commitment to advancing medical education in Brazil.

What Is UNIGRANRIO?

Founded in 1970, UNIGRANRIO offers a wide range of undergraduate and postgraduate programs, both in-person and online. Its core services include traditional degrees in fields like Medicine, Law, and Nursing, as well as distance education in areas such as Administration and Social Work. Unique selling points include special conditions for students, comprehensive infrastructure, and a flexible learning approach. The university is recognized for its quality education and has received various awards and recognitions.

Who Acquired UNIGRANRIO?

Afya is the largest hub of education and solutions for medical practice in Brazil. It offers a comprehensive range of undergraduate and postgraduate programs, alongside digital solutions like Afya Whitebook, iClinic, CliqueFarma, and Glic. With 38 undergraduate units and over 20,000 medical students, Afya plays a pivotal role in the medical education sector. Its influence extends to continuous professional development, supporting 1 in 3 medical professionals or students in Brazil.

When Was UNIGRANRIO Acquired?

Afya Limited completed the acquisition of UNIGRANRIO on August 4, 2021. This acquisition occurred during a period of significant growth in the medical education sector, driven by increased demand for healthcare professionals and the rise of digital learning platforms. The timing aligns with Afya's strategic expansion to enhance its educational offerings and market presence, capitalizing on industry trends that emphasize the importance of flexible and high-quality medical education solutions.

Why Was UNIGRANRIO Acquired?

• Market Expansion: The acquisition of UNIGRANRIO significantly expands Afya's market presence in Rio de Janeiro, adding 308 medical school seats and increasing the total to 2,611 seats. This expansion is projected to result in 18,799 medical students at maturity, representing a 9% CAGR from 2020 to 2026.
• Technology Integration: UNIGRANRIO's high-quality distance learning operation, which has a CI score of 5, will be integrated into Afya's existing educational framework. This integration is expected to improve the margins of Afya’s ex-Health undergraduate courses, enhancing the overall efficiency and reach of their educational offerings.
• Competitive Advantage: UNIGRANRIO is recognized for having the best academic quality among for-profit universities in Rio de Janeiro. This high academic standard, combined with the additional medical school seats and expertise in distance learning, strengthens Afya's competitive position in the medical education market, allowing it to offer a broader range of high-quality courses.

Acquisition Terms

• Acquisition Price: The aggregate purchase price was R$700.0 million, including the assumption of estimated Net Debt of R$73.9 million.
• Payment Method: The equity value was paid 60% in cash on the date of the announcement, with the remaining 40% to be paid in four equal annual installments, adjusted by the CDI rate.
• Key Conditions or Agreements:
  • The acquisition includes the assumption of R$73.9 million in net debt.
  • There are 82 additional seats pending approval by the Ministry of Education. If approved, additional payments will be structured as follows:
    • R$1.1 million per seat if approved in the first year after the acquisition.
    • R$1.0 million per seat if approved in the second year after the acquisition.
    • R$0.9 million per seat if approved between the third and fourth year after the acquisition.
  • The acquisition is expected to result in an EV/EBITDA of 4.1x at maturity and post synergies.

Impact on UNIGRANRIO

The acquisition of UNIGRANRIO by Afya Limited has led to notable changes in operations and management. UNIGRANRIO now operates as a subsidiary of Afya, integrating its high-quality distance learning programs into Afya's existing educational framework. This integration aims to enhance operational efficiency and improve margins for Afya’s non-health undergraduate courses. Additionally, the acquisition has increased Afya's total medical school seats to 2,611, positioning the company for significant growth in the medical education sector.

In terms of product offerings, the acquisition has expanded Afya's portfolio by adding 308 medical school seats and enhancing its distance learning capabilities. This move is expected to attract more students and increase net revenue, projected to reach R$343.2 million by 2023. While specific reactions from employees and customers are not detailed, the overall sentiment appears positive, with expectations of improved academic quality and service offerings. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a smooth and efficient transition.