Palamon reaps 14.6x on Cambridge Education exit

The purchase price represents 11x the company's current-year forecast EBITDA. Bridgepoint plans to supports Cambridge Education's continued expansion into international markets.

The exit has awarded Palamon with an IRR of 58% and a capital gain of £141m. It comes after Palamon decided to reduce its target in its latest fundraising effort after two years on the road and offer investors an Auxiliary Fund.

The divestment marks the sixth exit from Palamon's €670m 2006 fund, Palamon European Equity II.

Debt
Debt for the deal was provided by HSBC, GE, Bank of Ireland and Alcentra.

Previous investment
Palamon acquired a majority stake in Cambridge Education in March 2007 via a £10m management buyout. According to Louis Elson, Palamon's managing partner, prior to the deal the firm had identified the UK's higher education system as the nation's best export - or rather import - as demand from international students to access UK-based universities continues to grow. It was this beleif that led Palamon to Cambridge Education in order to build a more sophisticated and institutionalised approach to aiding foreign students in accessing UK universities. 

In April 2012, Palamon secured a £23m refinancing for the group, supported by RBS. The package included a dividend recap for equity holders and additional financing to support the company. 

Company
Established in 1952, Cambridge Education provides pre-university education to students from 95 countries. It works with partner universities and its own colleges to aid international students' progression to post-secondary academic institutions in the UK, the US and Europe. The company operates under the CATS College, Cambridge School of Visual & Performing Arts, FoundationCampus and Stafford House brands.

Over the past six years, under Palamon's control, the company has boosted student numbers from 460 per year across two campuses to more than 3,000 across four divisions in three countries. Revenues increased five-fold to around £90m for the academic year 2013-14.

People
Louis Elson is managing partner at Palamon. Dan Mytnik is a partner at Palamon and led the investment. Fergus Brownlee is CEO of CEG, while Stephen Warshaw is chairman. Chris Busby is the partner responsible for Bridgepoint's UK investment activity.

Advisers
Vendor – DC Advisory (Corporate finance); Slaughter & May (Legal); Eversheds (Legal); PwC (Financial due diligence); Parthenon (Commercial due diligence).
Equity – Rothschild (Corporate finance); Travers Smith (Legal); PwC (Financial due diligence); GK (Political due diligence); Marsh (Insurance due diligence); Parthenon (Commercial due diligence).
Management – PwC (Corporate finance); Macfarlanes (Legal).

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• Topics
• Exits
• Buyouts
• UK / Ireland
• Consumer
• Palamon Capital Partners
• Bridgepoint
• United Kingdom