Mid market private equity firm Palamon Capital Partners has concluded a transaction with Royal Bank of Scotland (RBS), to provide a GBP23 million financing package for its portfolio company, Cambridge Education Group. The deal includes a dividend recapitalisation for equity holders and additional debt financing for continued growth.
Cambridge Education Group is a leading UK provider of pre-University foundation programmes and English language training principally to foreign students keen to attend UK universities. Having identified the growing attractiveness of British education to international students Palamon acquired CEG in 2007 in partnership with a new management team led by Fergus Brownlee.
Since that time, CEG has tripled revenue organically to GBP55 million by expanding its teaching capacity whilst focusing on providing the highest standards of education. Overall the number of students taught on an annual basis has more than quadrupled from 460 at the time of investment to more than 2,000 today.
The strength and profitability of the business has allowed the Company to secure a financing package including capital expenditure financing, mortgage backed and revolving credit facilities which will support its future growth. The financing has also enabled the repayment of Palamon’s initial capital plus a return of over 50%. Palamon and the management team continue to own a significant majority shareholding in the Company.
Dan Mytnik (pictured), Partner at Palamon Capital Partners, says: “With Cambridge Education Group, we have supported a well positioned company to execute a remarkable growth strategy. The business is on a clear path to continue increasing profitability significantly over the coming years by further developing its teaching capacity and enlarging its footprint.”
Fergus Brownlee, CEO of CEG, says: “With Palamon’s financial and strategic support we have been able to execute an organic growth strategy that has tripled the size of the business in five years. With the additional backing of RBS we now have in place the facilities and capital structure to underpin the next stage of our development. We are delighted to have secured this backing.”
Peter Talbot Managing Director, Financial Sponsors, Midlands at Royal Bank of Scotland, says, “RBS has worked extensively with Palamon and have a good understanding of their growth investing model. We are therefore delighted to provide support to Cambridge Education Group, a fast growing and highly successful UK business. Under the leadership of a very strong management team CEG has clear drivers for future growth, which RBS is committed to supporting into the future.”
This is the third dividend recapitalisation that the Firm has completed since 2009, a reflection of the strength of both Palamon’s portfolio performance and its relationships with supportive banks. As Palamon’s growth investment strategy typically utilises modest levels of initial leverage, recapitalisations have successfully been used to return capital once a business has achieved scale. In every case Palamon has maintained a stake in the on-going businesses as they enter a period of accelerated growth.
