Private equity under fire in Sweden as country reconsiders education model- report

December 10
5:18 AM 2013

Private equity firms are under fire in Sweden as one of the country's largest private education companies declared bankruptcy earlier this year, a Reuters Insight report said. When JB Education, owned by Axcel, a Danish private equity firm, went bankrupt, it abandoned 11,000 students and cost close to a thousand staff their jobs, the report said. The bankruptcy also reportedly left over SEK 1 billion or USD 150 million of debts primarily to the firm's banks and suppliers.

According to the report, around a quarter secondary school students in Sweden now go to publicly-funded but privately-run schools. Close to half of this number go to schools that are fully-owned or partly-owned by private equity firms. However, school closures and deteriorating results have caused Stockholm to reconsider their deregulated education market, which was admired and followed worldwide. It is also causing the country to rethink about the involvement of the private sector in other areas such as health, the report said.

With elections scheduled next year, politicians are questioning the role of private equity, with some accusing them of putting profits first and foremost with practices that include not keeping records of grades and allowing students to decide if what they have learned is enough, the report said.

Corporate practices were also brought to Sweden's private schools, the report said. These included giving performance-based bonuses to staff and putting advertisements in Stockholm's subway system. Meanwhile, the tough competition has also placed pressure on teachers to give higher grades and actually market their schools, the report said.

The current state of having private equity firms and big corporations managing the schools was a far cry from the locally-managed schools that was originally envisioned. Although it is not clear how or even if the involvement of private equity in education and falling standards are even linked, the National Agency for Education said indications exist that market-driven reforms have also contributed to increase the gaps in school performances, the report said.

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