Target: U.S. Education Corp.
Price: $290 million, or 11x LTM EBITDA
Buyer: DeVry Inc.
Seller: Chicago Growth Partners, ClearLight Partners
Legal Adviser: Seller: Kirkland & Ellis
Chicago Growth—then known as
The firms had planned to shop U.S. Education Corp. later this year but DeVry, the Oakbrook Terrace, Ill.-based operator of several career colleges, including DeVry University, preemptively approached them with an offer. The deal is expected to close in September. “With the approach of DeVry and the aggressive price they offered, with some haggling, we thought it was the right decision,” said Rob Healy, managing partner at Chicago Growth.
Based in Mission Viejo, Calif., U.S. Education offers certificate and associate degree programs in nursing, radiography, surgical technology, pharmacy technology, dental hygiene, and medical and dental assisting from 17 campuses in the western U.S. It generates about $144 million in revenues, said Michael Kaye, managing partner at ClearLight. The purchase price represented 11x the company’s trailing 12-month EBITDA, according to a report by analysts at Robert W. Baird & Co.
That same report noted that bullish expectations for the post-secondary education market are based on population growth, a shift in the U.S. economy to service-based jobs from manufacturing ones, and a growing wage gap between people with a post-secondary degree and those with only a high school diploma.
During their ownership, Chicago Growth and ClearLight funded a total of four add-on acquisitions, opened new campuses and expanded offerings to include higher-end courses, which are in high demand due to a nationwide shortage of nurses, Healy said. The firms had financed the company with less than 50 percent debt through a senior secured credit facility provided by Bank of Montreal.
Chicago Growth, which closed its second fund at $500 million earlier this year, has been a longtime investor in education. In June 2007 it sold eInstruction Corp., a Denton, Texas-based company that makes application software for the education market, to Leeds Equity Partners for an undisclosed amount.
Other firms owning education companies are due for exits include