A fast-growing digital textbooks platform has laid the foundations for a Series B capital raise by appointing corporate financiers to scout out investors, EducationInvestor Global can reveal.

This publication has learnt that Kortext, whose e-textbook system is used by around 100 universities in the UK, has instructed EY to lead a growth capital raise that will see a minority stake in the business put on the block.

It is unclear, at present, how much money Kortext will seek to raise, at what valuation and in exchange for what percentage of equity.

Founded in 2013, Kortext is a leader in the UK’s e-textbook market – and its position is understood to have been enhanced by the pandemic, which forced universities to digitise rapidly and invest heavily in digital learning products and services. According to its website, Kortext has licensed more than one million e-books from over 4,500 publishers.

One consultant familiar with Kortext’s business model told this publication: “It’s an amazing business – properly amazing. Full deployment of its platform in a university can generate something like £3 million a year, with very high gross margins.

“I reckon it has the potential to, one day, get to £30-£50 million in EBITDA [earnings before interest, tax, depreciation and amortisation].”

Another source said: “It’s an absolutely cracking business – one of the best around.”

Kortext is currently loss-making, it is understood – however, the firm is expected to breakeven within the next 12 months, according to one insider.

Since its inception, Kortext has raised more than £15 million over three rounds, according to MergerMarket.

Filings with Companies House show that Kortext had 58 shareholders as of 21 May, 2021.

Kortext’s majority shareholder is founder and chief executive James Gray, who set up the business in Bournemouth, England, before establishing another office in Toronto, Canada.

Oher shareholders include Daily Mail Group Ventures, the British newspaper’s venture capital arm, and Committed Capital, a UK-based investment firm and corporate financial advisor.

In 2017, Kortext acquired academic bookseller Blackwell’s e-learning division for an undisclosed sum.

Comparable companies to Kortext include BibliU, Perlego, Bookboon and Chegg.

EY – which is also leading the sale of UK nursery chain Kids Planet, as revealed by this publication – declined to comment when contacted by EducationInvestor Global.

Gray and minority shareholders in Kortext could not be reached for comment at the time of publication.

Date published: 16 June 2021

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