Leeds Weld & Co. exited its investment in Datamark, a post-secondary education-focused marketing firm, selling the company to eCollege in a deal worth roughly $72 million. The transaction is expected to close within two months.
“One of the things we have focused on as a firm is the increasing growth of the proprietary and post-secondary [education] markets,” said Jeffrey Leeds, a managing partner with Leeds Weld. “Higher education increasingly outsources its non-core functions-such as enrollment services and marketing-and Datamark has been able to benefit from this.”
Leeds Weld acquired Datamark in the spring of 2000, in a $20 million carve-out deal from Focus Direct. Through the sale of Datamark to eCollege, a source close to Leeds Weld said, the returns will come in at around 8.5 times total equity, with an IRR nearing 100 percent.
Leeds Weld used its $160 million Leeds Equity Partners III fund for its investment in Datamark. eCollege will finance its purchase of the company with $58 million in cash and 150,000 shares of eCollege common stock, valued at $2 million. Leeds Weld will contribute to the financing, providing $12 million in subordinated notes and Jonathan Newcomb, a principal with the firm, will serve on the eCollege’s board of directors.
The $72 million purchase price represents a multiple of roughly 13.6 times 2002 EBITDA, although a source did indicate Datamark has seen its earnings and revenue continue to improve through 2003, which would shrink that figure somewhat.
“When we first acquired Datamark, the company was primarily providing marketing services on a direct mail basis…Ultimately they built a suite of services around enrollment and that helped drive growth,” Leeds said.
According to the press release, Datamark had revenue of $32.5 million in 2002, with EBITDA at $5.3 million. And in the last five years, sales grew at a compound annual rate of 27.4 percent.
The sale of Datamark comes at an opportune time for Leeds Weld, which is currently in the process of raising its fourth fund, Leeds Weld Equity Partners IV. The new fund has a target of $500 million. The sale of Datamark also follows the firm’s exit of Ross University, which was sold to DeVry for $310 million and generated a more than 5 times return on the investment.