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”.