The controlling shareholder has hired bankers at Morgan Stanley and Rothschild to oversee an auction of the company, according to the UK’s Sky News.
Study Group was acquired from the Australia-based private equity firm, Champ, by Providence Equity Partners in 2010 for £388.3m.
Speaking with The PIE News, a UK investment advisor said they believed a likely outcome will be that the group – comprising the Embassy, Bellerbys and Study Group ISC brands – will be acquired by another private equity firm, given the potential size of the transaction.
“They don’t have a strong presence in Canada, and the US is a small fraction of their business, but it will have to factor in to a larger growth story”
“There are no other obvious trade parties it could go to. Nobody has the funding opportunities or the strategic sense to put the two together.”
Most realistically the company will go to a “big cap” fund with an enterprise value of $500m to $1bn, they said.
The group could also be sold in a “dual track” deal whereby it is acquired by an investor as well as sold on the public market through an IPO, they said.
Other big education names trading in the public space include Navitas, IDP and Nord Anglia.
David Leigh, Study Group CEO, and Providence Equity Partners have both declined to comment on the rumours.
Our advisor source said they were surprised by the timing of the article, but the sale could be imminent. “Given the uncertainty in the business, it doesn’t seem an optimal time to sell,” they said but added, “with two credible advisors, it feels true.”
Political uncertainty in the UK and US could be overshadowing the group’s strengths in Australia –which is enjoying market buoyancy – where it has university and high school partners.
“They don’t have a strong presence in Canada, and the US is a small fraction of their business, but it will have to factor in to a larger growth story.”
Also, the slowdown in global ELT could be affecting the group’s English language provider, Embassy English.
The £700m sale price is likely based on an acquisition multiple of 15 times an EBITDA of £50-60m, our advisor source observed.
“Acquisition multiples have been creeping up in the past few years, given the dearth of large cap opportunities and the number of people trying to chase them,” they said.
In 2013, Cambridge Education Group sold to Bridgepoint Capital in 2013 for a record breaking 11 times the year’s trading forecast.
Study Group has operations in the United Kingdom, Australia, the United States, New Zealand, Canada, Ireland, and the Netherlands.
It delivers vocational training and education, high school, university foundation and first year university diplomas and degrees programs to over 73,000 students from over 150 countries each year.
Its higher education division recently announced a new partnership with Tennessee’s Lipscomb University, its third partnership in North America this year after adding to its portfolio Florida’s Lynn University, and Oglethorpe University, based in Atlanta, Georgia.