Montagu acquires Capita's ESS, invests in ParentPay

Katharine Hidalgo
14 December 2020

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Montagu Private Equity has agreed to acquire Capita Education Software Solutions (Capita ESS) from parent company Capita, and will invest in education technology provider ParentPay.

The firm is currently investing from its sixth-generation fund, which is said to have closed on €3.5bn in Q2 of 2020; however, the firm declined to comment on this.

Capita engaged with Goldman Sachs in June 2020 to sell the asset for around £500-700m, according to a report by Unquote sister publication Mergermarket. The process saw interest from a number of trade buyers, as well as Bain Capital, KKR, Advent International, Francisco Partners and TPG, in addition to Montagu.

Capita was speculating in October 2020 on whether to retain the asset in light of low offers, according to a report by Bloomberg; however, Montagu was confirmed as the only remaining bidder on 26 November 2020. Sources told Mergermarket that the asset could be sold for £350-500m.

ParentPay first hired Rothschild to advise on a sale process in 2018, though the sale was not reported on by the press since. The company renewed and extended its working capital facility, provided by Lloyds Bank, to £11m in October 2020.

Following completion of the transaction, the firm intends to merge Capita ESS with ParentPay following completion of the deal.

Completion of the Capita ESS sale is subject to approval from Capita's shareholders, and the proposed investment in ParentPay is subject to approval from the UK government's Competition and Markets Authority.

Company
Capita ESS is a provider of management information systems and related software for the education sector. The company is based in London and was said to be marketed based on adjusted EBITDA of £48m for 2020, against EBITDA forecasts of £41m for 2021 and £40m for 2022. Its revenues are projected to decline to £93m in 2021 from £94m in 2020, according to Mergermarket.

ParentPay provides online payments, income management, parental engagement and school catering software to schools and caterers across the UK, the Netherlands and Germany. The London-based company reported revenues of £27.4m and EBITDA of £13m in the year ending on 30 November 2019.

People
Montagu Private Equity – Edward Shuckburgh (director).
Capita Education Software Solutions – Andy Bennett (managing director).
ParentPay – Mark Brant (CEO).

Advisers
Vendor – Goldman Sachs (corporate finance).