
Deal in Focus: IK buys Studienkreis from Aurelius

IK Investment Partners completed 2017's second SBO in the German private education sector in a week, purchasing Studienkreis from turnaround firm Aurelius. Oscar Geen speaks to the firm's partner Anders Petersson about the pull of the sector and why Studienkreis stood out
IK Investment Partners this week acquired German private tutoring service Studienkreis from Aurelius Equity Opportunities for an enterprise value of €74m.
IK partner Anders Petersson says the sector offers good opportunities for private equity: "We have looked at various investments in the education sector over the years and this is the second German tutoring company to be acquired by a private equity company this year, so it's an attractive sector."
Deutsche Beteiligungs AG sold its own private tutoring service, Schülerhilfe, to Oakley Capital for an estimated €275m enterprise value, representing an entry multiple of 11.6x EBITDA, in May 2017. "We looked at Schülerhilfe but did not become heavily involved in the process," says Petersson. "Then when Studienkreis came up for sale over the summer we began to prepare."
IK drew equity from its €277m IK Small Cap I Fund. The vehicle held a final close in March 2016 and was approximately 55% invested in May 2017, according to unquote" data. The €74m EV acquisition was supported by a super senior package provided by Berenberg and a unitranche facility provided by the EQT Mid-Market Credit Fund.
Top marks
The GP was attracted to the company's management team and strong growth profile. "The management team have done a great job," says Petersson. "They started a number of great initiatives and the company has developed a very good online offering. There is still a lot of growth to be unlocked. This will be partly driven by expansion both through further acquisitions and opening new centres, but it is also about bringing more students to the existing centres. This second kind of growth also creates greater efficiency."
Aurelius invested €1m in its existing centres and €1.6m in expansion to new locations and to acquire third party institutes. Some of this investment came from Aurelius's balance sheet, but as the company became more profitable it was supplemented by Studienkreis's own cash flows.
We will start by expanding in Germany, but there is also the potential for some international expansion. The company already has some presence in Austria and Switzerland through its franchises, but there is still a lot of room for growth across the DACH region" – Anders Petersson, IK Investment Partners
It also introduced a digital marketing strategy and acquired Tutorial.de, as well as establishing its own online tutoring team of approximately 20 experts. In total, Studienkreis has opened 120 new locations since January 2013, when Aurelius acquired the group.
IK plans to oversee a continuation and acceleration of the expansion strategy into new geographies, Petersson says: "We will start by expanding in Germany, but there is also the potential for some international expansion. The company already has some presence in Austria and Switzerland through its franchises, but there is still a lot of room for growth across the DACH region."
Graduating
Aurelius generated a return of approximately 11.6x on its investment in the company, above its 9.8x average. The firm's CEO Dirk Markus told investors on a telephone conference that the firm was "not short of exit candidates for next year", adding that Aurelius had a "maturing portfolio".
It originally acquired Studienkreis from the Franz Cornelsen Education Group in January 2013. The group reported EBITDA of -€8.4m in 2011, but Aurelius said the turnaround process was started by the previous owner and it was profitable by the time of the acquisition, reporting €1.8m adjusted EBITDA for 2012.
Aurelius' presentation listed the EV as €75.6m but a source close to the situation told unquote" this included undrawn facilities and the actual EV was closer to €74m.
Studienkreis projected an adjusted EBITDA of €9.9m for 2017, a 15.5% margin on its projected €64.2m revenues. However leverage was secured on the basis of a slightly lower EBITDA figure, according to the same source.
Aurelius's CFO, Steffen Schiefer, said he is convinced that "we will see further successful development" of Studienkreis under IK's ownership.
Studienkreis was founded in 1974 and is headquartered in Bochum. It operates a network of 1,000 learning centres and offers small group tutoring to 60,000 primary and secondary school students across Germany. It also offers online tutoring and has developed the Studienkreis app for homework support.
People
IK Investment Partners – Anders Petersson (partner).
Aurelius Equity Opportunities – Dirk Markus (CEO).
Advisers
Vendor – Raymond James (corporate finance); EY (financial due diligence).
Acquirer – Goetzpartners (corporate finance); PwC (commercial due diligence); Renzenbrink (legal), Clifford Chance (legal); Ebner Stolz (tax).
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