Business Services Sector Comment – January 2015

Dato

The education & training market is becoming increasingly attractive to both trade and private equity, as they look to take advantage of favourable market conditions and a highly fragmented industry.

This month saw the announcement of Interserve’s acquisition of Employment & Skills Group (ESG), as the company looks to strengthen its position in the €6.2bn UK skills and training market and add to its existing Business Employment Services Training Ltd (now known as Working Futures) acquisition made back in May 2012. ESG is one of the UK’s largest private sector providers of training and employment services for government and employers, whilst also providing vocational training in three Further Education colleges in Saudi Arabia. The acquisition will not only add scale and breadth to its current service offering, but also provide a platform for further growth in Saudi Arabia and the Middle East.

The buyer population for training businesses is fairly broad and includes publishers looking for growth outside of their shrinking printing businesses, consulting companies looking to move away from lumpy project-based revenues and support services groups, whose roots often lie in low margin cyclical construction services, looking to move into higher margin activities with more stable revenue streams. Examples of companies which have deployed cash in this space include Capita plc, who acquired Creating Careers in May 2014, US credit ratings specialist Fitch’s acquisition of financial services trainer 7city Learning for €120m, and Pearson’s purchase of Brazil-based English language training provider Grupo Multi. Private equity is equally active in the sector as market incumbents typically have high margins, recurring revenues and operate an asset light model. Private equity companies with investments in the sector include Sovereign Capital and Providence Equity Partners.

It is not just the training sector that is high on the radar for private equity but also education. The sector is underpinned by strong market fundamentals which provide good opportunities for seasoned education investors to reap handsome returns. Sovereign Capital’s exit of World Class Learning (WCL) to Hong Kong-based Nord Angia Education, an international education provider, is a good example and provided a 5.3x return on money invested.

Private equity continues to be an attractive option for shareholders of education businesses, as they are often able to package a deal that includes access to additional capital in order to fuel international expansion. European investor Bregal Capital’s acquisition of Studialis, a French-based group of higher education institutions, is a good example. Since the initial acquisition in 2007, the company has acquired a further ten French private education groups and plans to continue to roll this out in other French-speaking territories. Cognita, another of Bregal’s portfolio companies, is also currently being rolled out internationally. Other global investors continue to be active in the sector, such as Apax Partners who recently furthered their investments in France through the acquisition of INSEEC Group in October 2013.

Clearwater International expects to see both the education & training industry consolidate over the coming years and is currently actively advising on a number of mandates in the sector.

 

Notable Business Services Deals

In a transaction advised by Clearwater International, the management of Waterfall Services Ltd has agreed to acquire the company in a management buyout transaction backed by LDC (Managers) Ltd. The contract caterer has revenues of €80m for the year ended 31 March 2014 and a workforce of 3,000 employees.

The management of Westway Services Ltd – the UK-based company that provides installation, commissioning maintenance and project management for all aspects of building services – has acquired the company in a management buyout transaction, backed by Maven Capital Partners UK LLP. The transaction will enable Westway to expand its business in the UK.

The management of Stackhouse Poland Ltd, the UK-based insurance broker, has acquired the company in a management buyout transaction backed by Synova Capital LLP, the UK-based private equity firm, for an undisclosed consideration. The deal is estimated to be valued at a minimum €55m.

Searchlight Capital Partners, the US-based private equity firm, has agreed to acquire Ocean Outdoor UK Ltd – the UK-based company engaged in providing digital and landmark products and banners for outdoor advertising – along with its management team, in a management buyout transaction from LDC (Managers) Ltd for an undisclosed consideration. The deal is estimated to be valued at €135m.

LV=, the UK-based mutual insurance, retirement and investment group, has agreed to acquire a majority stake of Teachers Provident Society Ltd (TPS), the UK-based company engaged in insurance business and offering a range of savings, investments and insurance products, for an undisclosed consideration.

Balfour Beatty plc, the listed UK-based company that provides engineering, construction and investment services, has acquired Thanet Offshore Transmission Project (Thanet OFTO), the UK-based wind farm project, from Vattenfall AB, the Sweden-based company engaged in the production, distribution and sale of electricity and heat, for a consideration of €220m.

Optionis Group, the UK-based provider of business outsourcing & workforce management solutions and a portfolio company of MML Capital Partners Ltd, has acquired Brian Alfred Associates Ltd, the UK-based tax advisory firm, for an undisclosed consideration.

Duff & Phelps LLC, the US-based financial advisory and investment banking firm, has agreed to acquire Kinetic Partners LLP, the UK-based company engaged in accounting audit and assurance services, for an undisclosed consideration.

Jelf Group plc has acquired Beaumonts Insurance Group Ltd and Beaumonts Risk Management LLP. Jelf is a listed UK-based consultancy headquartered in Bristol, providing corporate advisory services in the insurance, healthcare and financial services sectors.

HgCapital, the UK-based private equity firm, has agreed to acquire a 68% stake in A-Plan Holdings Ltd, the UK-based company providing insurance brokerage services, from Equistone Partners Europe Ltd for an undisclosed consideration.

Alchemy Special Opportunities Fund LP (the UK-based private equity fund of Alchemy Partners LLP) and US-based private equity firms Angelo, Gordon & Co. and Avenue Capital Group have agreed to acquire Avant Homes Holdings Ltd, the UK-based housebuilder and commercial property developer, from Lloyds Banking Group plc for an undisclosed consideration. The deal is estimated to be valued at €235m.

Temple Translations Ltd, the UK-based translation company engaged in precision translation of legal and financial documents, has acquired Kwintessential Ltd, the UK-based translation agency engaged in offering a range of services to international blue-chip businesses, for an undisclosed consideration.

Cartwright King Solicitors, the UK-based criminal and business defence law firm, has agreed to acquire The First Law Partnership, the UK-based law firm, for an undisclosed consideration.

European Capital Ltd, the UK-based private equity firm, has agreed to acquire a majority stake in Cordium Consulting Ltd, the UK-based company engaged in providing regulatory compliance consulting services and software to the asset management and securities industries, from Sovereign Capital Partners LLP for an undisclosed consideration. The deal is estimated to be valued at €135m.

Innovation Group plc, the listed UK-based provider of business process services and software solutions to the insurance, fleet, motor and property industries, has acquired EMaC Ltd, the UK-based motor service plan specialist, from Mobeus Equity Partners LLP and the company’s management for a cash consideration of €48m.

Toscafund Asset Management LLP has agreed to acquire a 71% stake in Avanta Serviced Office Group plc. Avanta – the listed UK-based company, headquartered in London – is engaged in the business of ownership and operation of serviced office accommodation.

Herbert L. Jamison & Co. LLC, the US-based insurance brokerage firm and subsidiary of Assured Partners Inc., has acquired Baronsmead Partners LLP, the UK-based insurance services provider, for an undisclosed consideration. The deal is estimated to be valued at €7m.

Capital Professional Ltd (CPL), the UK-based provider of financial advisory services, has acquired Unizone Ltd, the UK-based financial advisory firm, for an undisclosed consideration.

Covea Mutual Insurance Group Company, the France-based mutual insurance group, has agreed to acquire Sterling Insurance Group Ltd, the UK-based company which provides life and general insurance products and third party administration.

Crawford & Co. has acquired GAB Robins Holdings UK Ltd frim Kieran Rigby, Michael Jones, Paul Brown, Ian Sutcliffe and Kenneth West. Crawford & Co. – the listed US-based company, headquartered in Atlanta, Georgia – is a provider of claims management solutions to insurance companies and self-insured entities.

Avis Budget Group Inc. has signed a definitive agreement to acquire RAC Holding A/S from RAC Group A/S. RAC Holding – the Norway-based company, headquartered in Billingstad – is a provider of car rental services under the brand names Avis and Budget.

Control Empresarial de Capitales S.A de C.V. has agreed to acquire a 26% stake in Fomento de Construcciones y Contratas S.A. via a private placement. Fomento de Construcciones y Contratas S.A. is a listed Spain-based construction company, headquartered in Madrid, which is engaged in general construction, environmental services and renewable energy.

Cofidis Participations S.A., the France-based direct consumer credit provider, has acquired a 86% stake in Banif Mais SGPS S.A., the Portugal-based financial services company which provides auto finance, commercial loans, credit cards, insurance products and other consumer loans, from Portugal-based commercial bank Banif SGPS S.A. for a consideration of €410m.