Huron Reaps Education Windfall

Target: Delta Educational Systems

Seller: Huron Capital

Buyer: Gryphon Investors

Sale Price: Undisclosed

IRR: 85 percent

Advisor: Huron: Harris Nesbitt Burns

Legal Counsel: Huron: Golberg Kohn Ltd, Powers Pyles

Sutter & Verville PC

Detroit-based Huron Capital has notched its second homerun in the last three months, selling Delta Educational Systems to Gryphon Investors. The firm booked over $115 million in proceeds on the investment, generating an IRR of 85 percent.

Delta, based in Virginia Beach, is an operator of post-secondary vocational schools, with a presence based largely in the eastern United States. The company offers programs in healthcare, IT, business and advertising.

Huron originally acquired Delta in December of 2001, and by the end of 2002 had more than doubled the company’s size. During the lifespan of the investment, Delta’s revenues ballooned from roughly $9 million to around $60 million.

Much of Delta’s early growth came through new acquisitions. The firm notched add-on deals for advertising vocational school The Creative Circus and McCann Educational Centers, a business and IT-leaning education provider, among others.

Also, Delta’s organic expansion cannot be overlooked. The company added over 100 new education programs and built out five new branches during Huron’s ownership.

Even as Huron is unloading its stake in Delta, the firm remains committed to the education space. Last year it acquired Ross Learning, an operator of 14 healthcare-focused colleges, as a separate platform.

Huron Managing Partner Brian Demkowicz told Buyouts that his history in the sector goes back to his days at Heller Equity Capital, when he took part in the 1994 launch of Career Education Corp. In describing what drew Huron into the post-secondary education segment, he cited a number of factors that appealed to the firm.

“From a demographic standpoint, the need for education and training is growing alongside the population,” Demkowicz said. “And, historically, education as an industry tends to stay strong even when the economy slows down.”

The buyer, San Francisco-based Gryphon Investors, is also not new to the education segment. The firm launched a build-up in the space at the end of 2004, acquiring National Career Education, which operates campuses clustered around the West Coast.

Huron invested $5 million in the original 2001 Delta purchase, and contributed another $5 million to support the company’s expansion. The return on equity for Huron clocks in at an 11.7x multiple. The investment came out of its $72 million debut vehicle, The Huron Fund LP, and the firm raised its second fund last year, amassing $185 million in commitments.

The Delta exit is the second big win to come out of the inaugural fund in recent months. At the end of March, Huron reaped a 5x equity return on its secondary sale of York Label Holdings, a Pennsylvania-based label maker. Chicago’s Wind Point Partners was the buyer in the York transaction, which gave Huron an IRR of 83% on the investment. —K.M.