Tenzing nets 5.6x on exit of Smoothwall

The transaction is expected to complete this month, with Tenzing reaping a 5.6x multiple and 56% IRR on its investment. Raymond James ran the process for Tenzing, having been mandated around April this year, as reported.

Tenzing bought the Leeds-based business in 2017, backing the incumbent senior management team, Michael Marks, Nicola Sharp, Gavin Logan and Terry Heath.

The GP said it backed the business's growth both organically and through acquisitions. In May 2018, the company appointed Georg Ell as CEO and went on to revamp all business operations, expanding its core product suite into the cloud, and building out several new categories of products.

The GP invested via its debut fund, which closed on its GBP 200m hard-cap in January 2017, after three months on the road. The fund targets buyout investments in UK businesses valued at GBP 10m-50m. The GP has since raised Tenzing Private Equity II, which closed on GBP 400m in June 2020.

This is Tenzing's second exit. In mid-2019, Tenzing sold payroll services and software company FMP Global to Hg-backed Iris Software Group. Tenzing generated a money multiple of 5.4x and an IRR of 72%; the GP had invested in FMP on a deal-by-deal basis with support from Access Capital Partners.

Following a flurry of education sector deals in Q1 2021, Unquote reported on the drivers behind sponsor interest in the sector, which include digitalisation potential and the reliability of long-term demographic trends. At the time, 10 buyout deals totalling more than €700m had been completed in the sector, according to Unquote Data.

Since then, other deals have crossed the finish line, including Canadian pension fund Omers taking a 25% stake in International Schools Partnership (ISP), an operator of international private schools headquartered in the UK and majority owned by Partners Group, at a €1.9bn valuation.

Assets focused on education technology in particular is seen as the hottest sub-sector in the space, with multiples in the 15-20x range becoming the norm, according to market observers.

Company
Founded in 2001 and headquartered in Leeds, Smoothwall offers web-filtering technology for the education and public sectors. It serves 14,000 schools. Smoothwall generated an EBITDA of GBP 1.35m on sales of GBP 14m prior to Tenzing's investment, according to Unquote Data. According to a recent Mergermarket report, the business was to be marketed based on EBITDA of around GBP 5m.

People
Vendor – Raymond James (M&A); Osborne Clarke (legal).

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