European private equity firm THI Investments will acquire apprenticeship and leadership training provider Corndel after fending off competition from a trade suitor in the final bidding round, EducationInvestor Global can reveal.
This publication can confirm that THI Investments, which is headquartered in Stuttgart but has operations in London, has signed a deal to take a majority stake in Corndel at a cost of more than £40 million.
The final price is understood to represent more than 10-times Corndel’s full-year earnings before interest, tax, depreciation and amortisation (EBITDA) of £3.7 million, disclosed in a prospectus compiled by bankers.
The transaction, finalised today, will deal a blow to Davies Group, the US-owned insurance services provider, which progressed into the second and final round of bidding and had seen in Corndel an opportunity to bolster its newly formed ‘learning solutions’ division.
EducationInvestor Global unveiled THI Investments and Davies Group as the leaders in what was at one stage a three-horse race to acquire Corndel, before Queen’s Park Equity, a new buyout group, “was knocked out or dropped out” of the second round.
The deal will be celebrated by bankers from Lincoln International, which launched the auction of Corndel in September and is understood to believe it has achieved the highest-ever price-to-earnings multiple paid for a UK apprenticeship provider. Start to finish, the sale took less than 12 weeks.
A statement announcing the sale of Corndel is expected to be published next week – but it will not divulge terms of the transaction.
The takeover by THI Investments of Corndel will provide a significant return on investment to its some 35 enterprise investment scheme backers, who have bankrolled the company since its inception in 2017.
It will expand THI Investments’ education and training portfolio, which includes Learnship, a Germany-based online language-training provider, in which it made a growth equity investment in July 2017.
Under what is dubbed internally as ‘phase two’ of its growth trajectory, Corndel is seeking to grow its annual revenues to £100 million by 2025 from around £24 million now.
This timeline mirrors the typical investment horizon of private equity funds, which tend to sell, or exit, businesses within five years of acquiring them.
Corndel will use the fresh capital supplied by THI Investments to expand its market share in overseas and in the UK, from where the majority of its sales are currently derived.
Corndel’s core apprenticeships business – specialising in software development, data analytics and leadership training courses – will grow its revenue from around £20 million to £45 million over the next three years, reaching £60-70 million by 2025.
An additional £30 million of sales will come from Corndel’s partnership with staffing giant Adecco, under which it places 100,000 unemployed people in work each year.
Corndel also aims to enhance its ‘recruit, train, deploy’ offering, whereby it hires and coaches prospective employees then places them in jobs, skimming a portion of their salaries over an agreed period to recoup costs and make a profit. This model is particularly popular among IT training providers and technology organisations.
Corndel’s management team, led by chief executive Sean Williams, will remain in place under the deal with THI Investments.
Williams told this publication: “We’re absolutely delighted to have found an investment partner that shares our vision for quality training and is committed to helping us expand over the coming years to support more learners and employers while boosting productivity.”
Corporates clients of Corndel usually fund training using cash allocated under the apprenticeship levy.
The apprenticeship levy was introduced in 2017 and requires large companies whose payrolls exceed £3 million a year to set aside the equivalent of 0.5% of salary costs each month to fund workplace training. It is essentially a monthly tax on big corporations designed to encourage career progression via apprenticeships.
Corndel spotted an opportunity to sell training to management-level employees at a time when, prior to the levy’s introduction, apprenticeships had been targeted primarily at school leavers and low-level workers.
Unlike many traditional apprenticeship providers, Corndel was well positioned to deal with the ramifications of Covid-19, as its delivery model was 90% online prior to the pandemic.
Earlier this year, an auction of Lifetime Training, one of the UK’s largest apprenticeship providers owned by Silverfleet Capital, was abandoned after the company – which relies heavily on in-person training – saw its revenues decimated by the pandemic.
Date published: 27 November 2020