Baird says it expects to see a new wave of big-money buy-outs of education companies as investors eye opportunities for substantial growth.
It highlights the £185 million purchase of Cambridge Education Group by the private equity firm Bridgepoint in December 2013 as an example of investors seeking to enter the for-profit education market.
That deal meant its former owner Palamon Capital Partners gained a return around 14 times the size of their initial investment in the pathways course provider, which provides pre-university education to students from 95 countries.
Another pathway provider, INTO University Partnerships, which has study centres at many UK universities, is also highlighted after it sold a 25 per cent stake of its business to Leeds Equity Partners for £66 million in early 2013.
Baird concludes that “investors who understand the sector and the business models are well-positioned to generate attractive returns”, identifying more than 50 opportunities for mergers and acquisitions in the for-profit education market.
Martin Luen, a director in Baird’s Technology and Services Investment Banking Team, said there were 10 acquisitions in for-profit education which realised 10-fold returns or more.
“These are high quality assets which justified their valuations,” he said, adding there was a “scarcity of high quality education assets of scale”.
He added that the “deals we saw in this sector last year are just the tip of the iceberg”.