An investment bank is preparing online training provider Circus Street for auction, EducationInvestor Global can reveal, as consolidation gathers momentum in the corporate e-learning segment.  

This publication can confirm that Circus Street’s co-founders Jonny and Richard Townsend have instructed Houlihan Lokey, the US-headquartered investment bank, to find a buyer for the business.

Bankers will launch a formal auction but not until April at the earliest, it is understood, because Circus Street’s fiscal year ends in March, when it will next file annual accounts.

“I suspect it may be a while after April to show continued momentum into the financial year to March 2022,” a well-placed source said.

The mandate handed to Houlihan Lokey by the Townsend brothers marks a renewed effort to offload a controlling stake in Circus Street, which sells online training programmes to companies, increasingly under multi-year contracts.

Circus Street was brought to market last year by Canaccord Genuity-owned Petsky Prunier.

But the boutique investment bank failed to find a buyer willing to invest at a price based on a revenue multiple, which was targeted because Circus Street broke even at the time, according to an insider familiar with the process.

Since it was last on the block, however, Circus Street has reported profit and strong sales growth.

Its annual accounts for the year ended 31 March 2020 show that revenues grew 37% year-over-year, to £9.2 million from £6.7 million. Over that period, Circus Street booked profits of £571,787 and earnings before interest, tax, depreciation and amortisation (EBITDA) of £1.9 million.

A corporate finance source suggested that Houlihan Lokey may look to frame Circus Street as a software-as-a-service (SaaS) provider in order to sell the company at a multiple of its revenues, rather than its EBITDA.

“The pipeline for 2021 is strong and the directors forecast that there will be strong growth in contracted sales, EBITDA and net operating cash generated over the year in the current financial period, whilst remaining profitable,” Richard Townsend, chief executive, wrote in Circus Street’s strategic report, signed 8 October 2020.

At the time of publication, Richard Townsend had not responded to a request for comment made via LinkedIn.

Incorporated in 2009 and based in London, Circus Street caters to blue-chip companies including Unilever, Pfizer, GSK, Kraft Heinz and Heineken through its offices in the British capital, New York, Austin, Singapore and Sydney. According to Companies House filings, the company has 95 employees.

A successful sale of Circus Street would continue a wave of consolidation within the corporate e-learning segment, in which companies including iHASCO and Back2Work have in the past 12 months received capital injections from private equity funds.

Pandemic-linked lockdowns have boosted providers of online learning which sell to corporates, as employees working from home have required additional compliance training and upskilling.

Meanwhile, an uptick in unemployment has led many job-seekers to pursue online qualifications in order to enhance their CVs.

This week, EducationInvestor Global revealed that Shaw Academy is being prepared for auction after the Ireland-based online education provider reported a tenfold increase in student numbers as a result of lockdowns.

Houlihan Lokey – which in the past six months has overseen the sales of BIMM to Intermediate Capital Group and Hindawi to Wiley – is also currently preparing online assessment provider Questionmark for auction on behalf of FPE Capital, its private equity parent.

Houlihan Lokey declined to comment on its role in the sale of Circus Street.

Date published: 18 January 2021

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