ECI Partners is actively seeking buyouts and bolt-on deals in the education sector, the mid-market private equity group tells EducationInvestor Global, with a refined focus on ed tech, corporate e-learning and tech-enabled companies.

In an interview with this publication for its new Fund Focus series, Rory Nath, investment manager, outlined ECI Partners’ investment thesis and ambitions to expand its portfolio of education businesses.

At present, ECI Partners owns CPOMS, a school safeguarding-software provider poised to come to market later this year, and CIPHR, an HR, learning and payroll software solutions provider that sells to corporate clients and schools. Until January last year, ECI Partners also owned mthree, a company that hires, trains and then deploys technology consultants into corporations, which it sold to US-based publisher Wiley last year in a $129 million deal.

CIPHR intends to continue complementing organic growth with acquisitions, the latest having been learning management system (LMS) provider Digits in September 2020. Meanwhile, ECI Partners continues to seek new platform deals.

ECI Partners at present is investing from a £700 million fund, with the capacity to invest in companies valued at up to £250 million. It usually holds stakes in companies for three-to-five years before exiting – as is typical for a private equity house. 

The buyout group will consider both minority and majority transactions and is “really flexible” with regards to deal structure and size, Nath stressed, adding that ECI Partners “likes to meet management teams very early” – even those overseeing smaller organisations with relatively low enterprise values. 

“What we look for across all of our deals is a combination of growth, resilience and great management teams,” said Nath, adding that this is a combination ECI Partners sees repeatedly in the education sector. “If you have that combination, we want to talk to you,” he urged.

Nath highlighted specific segments of the education sector in which ECI Partners is actively targeting deals.

Whilst ECI Partners is preparing to exit its stake in CPOMS – a move Nath declines to comment on – the firm remains keen on the school software space, he said.

Last year, the segment witnessed a spate of private equity-driven consolidation after Capita’s Education Software Solutions (ESS) unit was put up for sale in June, as revealed by EducationInvestor Global. ESS owns SIMS, the UK’s largest school management information system (MIS) provider. In the months after ESS was put on the block, SIMS’ main competitors – Arbor Education, iSAMS and The Key – began exploring sales and mergers that would be bankrolled by private equity financing. Meanwhile in the US, private equity-backed PowerSchool has filed for a New York initial public offering.

Nath said that while “it makes a lot of sense to start with an MIS” if building out a multi-product software suite geared at schools, “I don’t think it’s absolutely necessary” because cross-selling in this market “is really hard, and there are very few businesses that have proven themselves as a proper cross-sell channel – CPOMS being one of them”.

Rory Nath, ECI Partners

Nath, who is also a non-executive trustee at a multi-academy trust, continued: “This creates opportunities for products that sit around the core MIS – like CPOMS, which has grown up alongside that dynamic.

“We like software that addresses the most critical needs of schools. This could be SEN management, or attainment and attendance tracking, for example. There are a lot of others adjacent to MIS. Schools need to digitise. There are antiquated systems that still involve pen-and-paper processes.”

Nath also sees an “overlooked” opportunity for a consolidation play in the higher education software space. In April, London-listed Tribal Group acquired university timetabling software provider Semestry Limited in a deal worth up to £6 million

Higher education institutes face “a number of the same challenges around digitisation that I mentioned in the schooling context”, said Nath. “If you’re a higher education software business listening, please reach out – I’d love to talk to you.”

Pricing, in the context of education software, has been driven higher in recent years by several factors, said Nath, who thinks that current valuations are sustainable “at least in the medium term”.

He added: “Scarcity value is the most important factor. In any market, pure software models with strong market positions are going to command a premium. In school software, the fact that there’re so few scaled assets and so many investors interested, I think the demand and pricing we’re seeing at the moment will persist.

“There are very few players of material scale – so we’re keeping a sharp eye on those coming up the ranks.”

ECI Partners is also eyeing deals in the corporate education arena, said Nath. Earlier this month, London-based private equity house Verdane acquired a pair of Finnish corporate e-learning providers.

“We’re spending a lot of time in corporate e-learning,” he said. “We think there is a massive market opportunity there.” ECI Partners is particularly interested in e-learning software platforms and high-quality learning-content providers.

“Reskilling and upskilling are words that’re bandied around but when you actually pause and think what it means to reskill a workforce, that’s a massive undertaking. You’re not going to achieve that without a proper L&D [learning and development] strategy and investment behind user experience. 

“Ultimately, it’s a massive market so there will be lots of winning strategies. I’m convinced that there are going to be niches that are relatively overlooked by virtue of it being such a huge opportunity.

“There could be market leaders beneath the radar, amazing businesses that have gone unnoticed.”


This Fund Focus interview was conducted on 12 April, 2021. For more information on our Fund Focus series or to take part, please email us.


About the interviewee and their fund

Rory Nath is a member of ECI Partners’ investment team and leads its coverage of the education sector, with a focus on ed tech and tech-enabled services. Rory’s current investments at ECI include CPOMS, a market leader in safeguarding software. Outside of work, Rory is a trustee at STEP Academy Trust.

ECI Partners is a private equity house that invests in growth businesses valued at up to £250 million. It has more than 40 years of experience in collaborating with management teams to build successful global businesses. With a track record of over 110 realisations, ECI Partners invests as either a majority or a minority investor, and is currently investing its eleventh buyout fund.

Date published: 10 June 2021

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