A private equity-owned school software supplier is close to signing a deal to acquire iSAMS, the management information system (MIS) used by a third of UK private schools, EducationInvestor Global can reveal.

This publication has learnt from two sources that IRIS Education, part of IRIS Software Group, which is jointly owned by buyout houses Hg Capital and Intermediate Capital Group, is on the cusp of taking over iSAMS.

A well-placed source was this week “100% confident” that a controlling stake in iSAMS will be purchased by IRIS Education, which sells a range of accountancy and administration products to more than 11,000 UK education institutions.

A final agreement between IRIS Education and iSAMS is imminent, it is understood. 

When contacted by this publication, a spokesperson for IRIS Software Group said it was “unable to comment on any market speculations”.

A deal, the value of which is unclear, would create a liquidity event for iSAMS’ shareholders – Alastair Price, founder and managing director, and Gregory Pakes, technical director, who earlier this year appointed Grant Thornton to explore sale options.

Meanwhile, it would present to IRIS Education an opportunity to expand the organisation’s footprint in the UK school MIS market, which is undergoing significant change as a result of the auction of Capita SIMS and a merger between Arbor Education and The Key – competitors to iSAMS.

In acquiring iSAMS, IRIS Education may see a unique chance to snag market share from rival providers amid an unprecedented shake-up of the sector, in which Capita SIMS is the largest player, servicing around 80% of UK state schools.

Despite being a minnow in comparison to Capita SIMS, iSAMS has an advantage over the market incumbent: its suite of management tools, which is used by 30% of British private schools, is cloud-based, whereas Capita SIMS runs on antiquated in-school servers.

IRIS Software Group’s executive chairman, Kevin Dady, spent 18 years with Capita, during which he had oversight of SIMS.

By purchasing iSAMS, IRIS Education would also gain a large slice of the UK’s private school market, in which the organisation has limited reach, as it sells chiefly to state-funded multi-academy trusts.

iSAMS, whose profit has been touted at around £1 million by corporate financiers from Grant Thornton, claims to be the first-ever cloud-based school MIS provider. In the year ended 30 September, 2019, the company recorded turnover of £8.4 million – up from £6.9 million a year prior – and profit of nearly £632,000.

Sources suggested that iSAMS would be a “good fit” within IRIS Education’s cloud-based product portfolio, which spans several budgeting, payments and administration software platforms.  

“It makes sense; iSAMS would fit well with their [IRIS Education’s] accountancy product,” commented one source.

Another said: “It makes sense with IRIS’s other bits and pieces.”

An acquisition of iSAMS by IRIS Education would also see London-listed Intermediate Capital Group deepen its foray into the UK education sector three months after this publication revealed it was the frontrunner in a race to buy the British and Irish Modern Music Institute, or BIMM, from Sovereign Capital Partners.

Intermediate Capital Group bought a stake in IRIS Software Group in 2018, in a deal that valued it at around £1.3 billion – which, at the time, was the largest-ever UK private equity software buyout. Hg Capital has held a stake in IRIS Software Group for over a decade, most recently through its Saturn investment vehicle.

Hg Capital knows the UK school MIS market well: its co-founder and former chief executive Ian Armitage is chairman of The Key, which is merging with rival Arbor Education, in which Armitage personally holds a minority stake. Armitage orchestrated the tie-up between the two organisations, it is understood, in which buyout group CBPE Capital is poised to acquire a minority stake, as revealed exclusively by this publication.

A source familiar with Hg Capital’s strategy told this publication that the group is “highly motivated” to grow IRIS Education because it is “sub-scale” in comparison to the parent group.

“iSAMS is a good opportunity for them [IRIS Education], though they have to be careful they do not apply the normal IRIS buy-and-cut-costs model to drive up margins towards the 60% average that IRIS generates elsewhere,” the insider added. “I don’t think there are easy opportunities to share costs without damage to product or service.”

Founded in 2005 after Price had been inspired to solve the frustrations of his teachers at the illustrious Rugby School, which he attended alongside business partner Pakes, iSAMS is used by more than 950 schools in over 75 countries and has more than 500,000 daily users.

In addition to its core school MIS platform, iSAMS also offers three mobile applications geared at teachers, students and parents, which it launched in 2015, as well as data compliance functions and a school software marketplace.

Date published: 6 October 2020

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