The education sector has long been of interest for private equity investors. In fact, over the last five years financial investors have roughly accounted for 20% of all deals and this trend is showing no signs of abating. However, as with any private equity deal, the acid test always rests on the ability to realise the investment at the appropriate time, typically within a 3 – 5 year window.
In 2013, a number of funds made investments in the sector, including UK-based August Equity, Graphite Capital, Sovereign Capital and Inflexion but also funds from further afield such as US-based Leeds Capital, Providence Equity Partners and TPG Capital. Now, three years on, a number of these assets are coming to market at a time when buyer appetite is strong which in turn is driving high levels of deal activity by both trade and larger private equity funds.
Certainly over the last 12 months, it has been trade that has taken the lead, acquiring a number of high profile assets, particularly across the schools, colleges and higher education market. Most recently, Los Angeles-based LLCP exited its investment in Mander Portman Woodward (MPW) to Kaplan International. MPW is a leading operator of three UK-based independent sixth-form colleges in London, Birmingham and Cambridge. The deal, rumoured to be valued at €151.5m, looks like a fantastic return for LLCP which bought the business back in 2012 for €72.6m. In another deal in the higher education space, Netherlands-based Global University Systems, which owns a number of higher education and English language training companies, acquired University of Law (ULaw) from Montagu Private Equity. The trend is not just limited to the UK, as French for-profit higher education group Studialis was recently acquired by Luxembourg-based post-secondary group Galileo Global Education. The deal provided an exit for European fund Bregal Capital. In another area of education, Inflexion successfully exited CTC Aviation, one of the world’s largest independent airline pilot training and resourcing companies, to NYSE-listed L-3 Communications.
However, whilst trade has been the most active as of late, the option of a secondary buy-out or flotation remains very real. Inflexion’s float of IT training firm FDM Group in mid-2014 is a good example and generated a return of 16.0x initial investment. More recently, Norway-based Herkules Capital completed the secondary buy-out of Seagull from specialist European fund GMT Communications Partners and Bridges Ventures exited its investment in apprenticeships provider Babington in a deal in which Clearwater International advised management.
Here at Clearwater International, we very much expect deal levels to remain constant over the coming year, supported by strong buyer appetite and record valuations. In terms of our experience, in the last 12 months we have advised across the full spectrum of the education market, including advising: