A private equity-backed for-profit university is in advanced talks to acquire apprenticeship provider Estio Training, EducationInvestor Global can reveal.

EIG has learnt from two sources that BPP University, backed by TDR Capital, is in final-stage discussions to purchase Estio Training from its current owner, Palatine Private Equity.

As reported by EIG in April, Estio Training had been slated to come to market in an auction that was to be led by Clearwater International after nearly three years of ownership by Palatine.

However, after canvassing the market, EIG understands that a competitive process was never launched because BPP tabled an unsolicited offer for Estio Training in the summer, pre-empting prospective bidders, several of which were expecting a September kick-off.

The value and terms of BPP’s offer are unclear.

BPP’s corporate development strategy is being steered by TDR Capital, which acquired a majority stake in the private university in March from Vanta Education in a deal that sources say was worth more than £600 million, as revealed exclusively by EIG.

BPP already offers apprenticeship courses in fields such as accountancy and law, one investment banker noted, adding that, while a takeover of Estio Training “feels like an expansion, it’s thematically similar, given its focus on white-collar services”.

Estio Training offers Level 3 and 4 apprenticeship courses preparing students for careers in IT industries, including digital marketing, data analytics, dev ops and software development.

According to filings with Companies House, the firm recorded normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of £1.2 million for the year ended 31 July 2020, up from £750,000 a year prior – a 60% increase. Estio Training’s turnover grew to £11.6 million from £9.2 million over the same period. “The business has grown incredibly quickly,” commented one banker with deal-making experience in the apprenticeship sector.

Another investment banker privy to TDR Capital’s plans for BPP stressed that the organisation is “certainly not afraid of the apprenticeships sector” as the financial sponsor has “managed to get comfortable with the business model”, which entails government-funding elements.

In 2019, MergerMarket reported that BPP’s “main future growth source” would be its apprenticeship operations.

According to its website, Estio Training has more than 700 clients, many of which are large corporations that bankroll employees’ apprenticeships through the so-called levy scheme, which sees funds equal to 0.5% of wage bills ringfenced for training courses. Only organisations with annual wage bills of £3 million or more are required to pay the levy.

According to its strategic report, Estio Training has contracts with the Education and Skills Funding Agency (ESFA), as well as levy-paying employers. Despite “extremely challenging conditions” related to the pandemic, the organisation ended its 2020 financial year with 1,111 learners enrolled, down 109, or 9%, from the previous period, chiefly due to Covid-19.

BPP’s backer TDR Capital also co-owns British supermarket chain Asda.

BPP, TDR Capital, Palatine and Clearwater did not respond to requests for comment.

Date published: 17 September 2021

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