RTO Market Update: What This Means To You!

Wanted to share with you what is happening in the market. It has probably one of the most turbulent few months I have seen in a number of years. Let’s look at some of the reasons for this.

Geopolitical instability
After effects of COVID
Australia’s debt position
Changing Govt policies

1. Geopolitical Instability:
• International student enrolments are a significant income stream for many RTOs. The current global instability affects confidence in student travel and the way the Govt botched COVID and visa production for students also affected this confidence.

2. Post-COVID:
• The pandemic’s influence on education lingers both internationally and domestically.
• From a domestic side, online went massive and the BAC funding over stimulated the sector

3. Australia’s Debt & VET Funding:
• The government’s high debt position might lead to cuts in VET funding. Proactive RTOs should explore alternative revenue streams and diversify offerings to mitigate risk. State’s do not have money. This is coupled with TAFE BUT hen the Govt mentions tafe they are including private RTO.

4. Changing Government Policies:
• Government policy shifts in VET significantly impact the value of the RTO. Educating buyers, and to a lesser extent sellers, about funding changes, accreditation requirements, and evolving industry regulations takes time.

It was a rocky and disappointing start to the year for most vendors. Due to the above 4 reasons, we saw a very low sentiment, low action by buyers and lower than expected prices.

This started at Christmas, which is normal but in January there was wind of major shake-ups at ASQA, this stopped the market and left buyers scratching their heads as to what was happening. The result was pretty much “pens down” and wait.

As these changes came to light, it caused confusion more than anything which lasted through February.

Let’s move to the now and the future.

Buyers are circling and the last two weeks have seen a perceptible shift in the market in a positive way. The coolness in the market is slowly being replaced with action. We can see this in four ways.
• The language being used by buyers
• The willingness shown in buyers to create action items moving deals forward
• The number of enquiries we are receiving
• Term sheets we are receiving by buyers showing they want to purchase.

Why? I put it down to the following 6 reasons.

• Buyers are realising that the ASQA changes will make it harder for New RTO to be created but as the ownership of the RTO does not change in a sale it does not affect existing RTO. If this sounds confusing, let me know and I will explain the subtleties of this..
• There is a stability in the market with interest rates not rising
• State Governments are not allowing RTO to access funding if they do not already hold contracts
• CRICOS is bouncing back – not at pre-covid times but certainly offshore enrolments are rising
• Buyers are understanding the value in RTO and the resilience the industry has.
• The ASQA changes will create a supply void of RTO and equal demand which will slowly re-align the market.

It does not mean prices are going to through the roof however they will slowly rise over the next six months.

You have my absolute guarantee I will continue to work to achieve the best possible result with these underlying market conditions.

We will always provide objective and transparent information to buyers and vendors and I hope this little video gives you an understanding of where the market is.

I am buoyant on the RTO market. CRICOS RTO will bounce back albeit slower than domestic RTOs. Shell RTO – under 300k will become hot and as more and more buyers realise they will not get funding, these will come into vogue.

The middle to top end of the market (above $1M) will certainly grow as the education continues to prove to be a safe landing spot for capital.

Happy to discuss any part of this with you and I know I will get the result for you.