Investors purchase career school

A New York investment firm bought employee-owned York Technical Institute and has ambitious growth plans for the career school.

Liberty Partners, a private equity firm in New York City, bought York Technical from employees and a minority owner for an undisclosed amount. It took control of the school May 2.

Liberty is hungry for further acquisitions and may expand YTI by purchasing similar institutions in Central Pennsylvania, said Tim Foster, a company official. York Technical is Liberty's first investment in higher education.

Employees owned 88 percent of the school through their retirement plan and voted to sell their stake in January. John McCartan, a Pittsburgh resident who bought into the institute in 1983, sold Liberty the remainder.

"For the institution as a whole, it provides an opportunity to continue to grow and develop and do good things in the community," said Harold Maley, YTI's president.

None of York Technical's managers or employees will be laid off as a result of the deal, officials said. YTI employs about 240 people.

The school has grown rapidly, and Liberty plans to spur that growth along with further investments, Foster said.

"Certainly, we will see new programs, and we may well see new sites," he said.

YTI opened a location in Lancaster County in October 2003.

Foster leads Liberty Partners' higher education division, which also was formed May 2, and is YTI's new executive chairman. He will be based at the school's main campus in Springettsbury Township.

Liberty hopes to buy other brick-and-mortar schools, especially in the region, and to invest in distance learning, Foster said.

"We definitely see ourselves as a school for this region," he said.

YTI's board was reshuffled. It will be composed of four Liberty representatives and Maley, who handed over the chairmanship to Foster. Local education professionals and employer representatives who were on the school's board of directors have been retained as an advisory board, Foster said.

Most of YTI's employees owned a piece of the school through an Employee Stock Ownership Plan, Maley said. In ESOPs, employees own a certain share of their company and receive payments based on the value of that share when they retire.

Liberty offered employees an attractive buyout that they accepted by an overwhelming majority, officials said. They have the option of taking cash payments or rolling the money over into a new 401(k) plan.

John Jamison is a 2002 YTI graduate who studied electronics and now owns Installation Doctor, a York business that installs radios and other devices in cars. His experience at YTI was crucial to making him successful, Jamison said.

"We worked together as a team a lot. That really helped my people skills a lot," he said.

Jamison said he was concerned the school would no longer be in local hands.

"(Local owners) have sort of got a better understanding of the community ... which I think makes a big difference," he said. "(The new owners) may not know much about York, P-A. I don't know if they're just worried about their bottom line."

The deal moves the institution out of local control for the first time, said Daniel G. Meckley III of Spring Garden Township, who owned it with a group of investors during the 1980s.

Although it could lose some of its local flavor, the school would not suffer for lack of a resident owner, Meckley said. "I don't think it really makes much of a difference," he said. "The school will stand or fall based on the way it operates and its content."

He said the school would have greater access to capital, as well.

York Technical's new owners have much more money available for potential expansion projects than the school could have mustered on its own, Maley and McCartan said.

During negotiations, York Technical officials told Liberty Partners they wanted students' well being to remain a top priority, McCartan said.

York Technical has been financially successful, officials said. The school's revenues grew by 22 percent between fiscal years 2003 and 2004 and will grow by 17 percent between fiscal years 2004 and 2005, Foster said. Profits have grown nearly as quickly, he said.

The school sold itself in an auction-style process and received about eight or nine formal offers, McCartan said. The sale process took more than a year, Maley said.

The for-profit, post-secondary education sector has grown rapidly in the last decade, said Sean Gallagher, a senior analyst at Eduventures Inc., a Boston consulting and research firm focused on the education market.

For-profit institutions enrolled close to 10 percent of all postsecondary students in 2004 and reeled in revenue of $15.4 billion, he said. Gallagher said the field is competitive, efficient and focused on career-oriented disciplines. "These schools couldn't continue, they couldn't stay in business, if they weren't delivering a quality product to their students."