M&A activity in the education and training sectors

Following the acquisition of TES Global by Providence in 2018, there is continued M&A interest in UK-based education and training businesses, including from international buyers. 

Between 2013 and 2017, Chinese deal-making in the education sector grew in value terms by 35x and the UK has been a key market for acquisitions, only behind internal Chinese deals and the USA. This activity has continued through into 2019, with a number of strategic acquisitions by Chinese acquirers.

There is equally strong demand from American for-profit education businesses currently enjoying somewhat of a stock market renaissance. These organisations are looking to bolster future growth via M&A under a current administration that has adopted a more transparency ‘carrot’ than tax ‘stick’ approach to regulation.

Acquirers worth watching in Education & Training M&A.

Bright Scholar Education

The Chinese education conglomerate Bright Scholar continues to be acquisitive, with three recent company purchases in the UK. June 2019 saw the acquisition from Broadway Education of Bosworth Independent College and St. Michael’s School, for a combined consideration of c. £38m and a profit (EBITDA) multiple estimated to be in excess of 12x. This was followed in July 2019 with the acquisition of CATS Education from the Cambridge Education Group for c. £150m. Driving all of these acquisitions is Bright Scholar’s strategic goal of expanded its footprint outside China, and further acquisitions in support of this goal seem likely.

Jerry He, Executive Vice Chairman of Bright Scholar said: “The acquisition of CATS expands Bright Scholar’s significant presence outside of China as we continue to build a global network of premium schools. The addition of CATS’s international network of schools will help Bright Scholar share best practices and innovations. It will also set the stage for accelerating the expansion of our overseas school portfolio, distinguishing us as a global premium education service provider.”

FutureLearn

April saw the 50% sale of FutureLearn, the UK-based online training course/MOOC provider, from the Open University in a c. £50m deal with SEEK, the Australia based listed operator of online classifieds and training. This deal is pursuant to SEEK’s strategy to deploy capital into markets leading the human capital sector. It is planned that this acquisition will enable SEEK to further expand its operations across the UK and Europe.

SEEK CEO Andrew Bassat said: “We like to invest in disruptive business models that provide world class student education outcomes. Technology is increasing the accessibility of quality education and can help millions of people up-skill and re-skill to adapt to rapidly changing labour markets. We see FutureLearn as a key enabler for education at scale.”

Grand Canyon Education

This US acquiror has been referred to as the ‘gold standard’ of for-profit education, spinning off its direct education arms and focussing on education support services and recently completing the domestic acquisition of Orbis Education Services. Currently only in the USA, with an increasingly global market for education, one has to ask how long it will be before expansion into new geographies becomes a key source of sustained growth for Grand Canyon and its peers.

Steve Hodownes, chief executive officer, Orbis Education said: “Grand Canyon Education is an excellent fit for Orbis and provides a transformational opportunity for our academic and healthcare partners… both organizations are mission-driven and intently focused on generating high-quality results and outcomes.”

Speedy Hire Plc

Speedy was perhaps a more tangential acquiror within this market at the tail-end of 2018, acquiring Prospects Training International, the UK provider of construction & professional services training, as part of its desire to grow its training business. With an initial consideration of £9m payable for the c. £1.7m EBITDA business, and a potential £26m payable on earn-out dependent upon the performance of the combined training business over the next 3 years.

Russell Down, Chief Executive of Speedy said: “This acquisition expands our training services offering and allows us to deliver flexible, progressive training programmes to support customers across the UK.”

Private Equity buyers in the education and training sector

Synova Capital

Synova Capital acquired a majority stake in UK based primary school business Chatsworth Schools in March 2019 for an undisclosed consideration. This transaction is reported to be in line with Chatsworth’s longer term strategy to grow both organically and via further add-on acquisitions.? ?Tim Ashlin, a Partner at Synova, commented: “We are delighted to be partnering with the Chatsworth team, who have a track record of exceptional educational leadership. Their focus on quality as the foundation for building a successful, education-led group fits with Synova’s approach to long-term value creation and our commitment to providing support throughout the life of our investments.”

Oakley Capital

May 2019 saw Oakley Capital, the UK Private Equity Firm, back the incumbent management of Videotel Group, the provider of maritime training services, to acquire control of the business from US based KVH Industries for c. £90m on a cash-free-debt-free basis, with a reported EBITDA multiple in excess of 10x. Oakley will be combining the business with a simultaneous acquisition of Norwegian Seagull AS, providing similar services to Videotel.? ?Oakley state that: “The digital transformation taking place in the shipping industry, as well as the increasingly complex regulatory framework, offers a significant opportunity for e-learning providers. The management teams of Seagull and Videotel believe that this opportunity can be grasped most effectively by working together as a combined group.”