CVC weighs strategic options for IT training provider QA

Josh O'Neill and Charlie Taylor-Kroll
02 December 2022

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CVC Capital is weighing strategic options for QA that could lead to an exit or the breakup and sale of parts of the UK-based IT training provider as early as next year, six sources familiar with the situation said.

The sponsor has started informal discussions with market participants about its options for the portfolio company but is yet to appoint financial advisors, three of the sources said.

While a full exit is under consideration, CVC is simultaneously examining alternative options such as the disposal of individual business units, two of the sources and an additional sources said. QA comprises two key divisions: Higher Education and Workforce Learning, through which corporate training is delivered, the first source explained. The sponsor could see the sale of parts of the business as a way to extract further value from the asset, three of the sources said.

Any full sale could see the business marketed off more than GBP 80m in EBITDA, according one of the sources and an additional two sources familiar with the situation. In the year ended 31 May 2021, QA booked gross profit of GBP 89m against turnover of GBP 168m, Companies House filings show. The holding company, Seckloe 208 Ltd, recorded pre-tax profit of GBP 38m over the same period, according to public filings.

QA, which provides technology-focused skills training, was impacted heavily by the pandemic, which halted classroom-based tuition and in turn impacted its bottom line, two of the sources said. However, the company has since recovered and is performing well, evidenced by material growth to its EBITDA since CVC's takeover, one of the sources noted.

If a sale of a majority stake in QA materialises, Partners Group is among sponsors that could consider a bid for the business, one of the sources. The Swiss private equity firm has in recent months held preliminary discussions with advisors about the asset, this source continued.

CVC acquired an 80% stake in QA via its sixth fund in June 2017 from Bregal Capital in an off-market deal reportedly worth GBP 700m under which management retained a 20% stake. This enterprise value represented a multiple of roughly 15.5x, based off marketed EBITDA in the region of GBP 45m at the time, according to the first source. Bregal reportedly netted a 15x return on its investment in QA.

Under CVC's ownership, QA has executed multiple bolt-on acquisitions, including that of InfoSec Skills, a smaller UK-based peer; US-based Cloud Academy; and, most recently, Circus Street, a UK-based online training provider.

Last year, QA provided education to more than 281,000 people worldwide, according to its website. The company provides training to employees of more than 3,500 organisations, which account for a significant portion of the FTSE 250, it says. QA specialises in technology transformation by developing and implementing training programmes that help businesses upskill and reskill existing employees, in addition to recruitment services.

A representative for CVC declined to comment. QA and Partners Group did not respond to requests for comment.