Thoma, Trident Hit The University Circuit –

What goes up and never comes down? Age was the original answer to that ancient riddle. But in today’s environment, it’s safe to say that college tuition is arguably just as good an answer. And with higher-education becoming a more pervasive industry than ever before, educational institutions are finding it necessary to upgrade their infrastructural software packages to meet today’s increased demands and complexities.

Datatel Inc., a technology and services provider to the higher education market, is being tapped on a more frequent basis by colleges and universities for its ware. Seeking growth, the company agreed to a management-led buyout backed by Thoma Cressey Equity Partners and Trident Capital. Aside from having a 50/50 equity-to-debt ratio, financial terms of the transaction, which is expected to close within two weeks, were not disclosed.

Together with the company’s executive management team, the two private equity firms will purchase Datatel from its two founders, Ken Kendrick and Tom Davidson. San Francisco-based Thoma Cressey provided about two-thirds of the PE-backed dollars invested in the transaction while Palo Alto, Calif.-based Trident provided the remaining one-third, Orlando Bravo, a partner at Thoma Cressey, told Buyouts. Datatel’s current management team will remain in place, while Russ Griffith, the company’s president and CEO, will additionally assume the role of chairman of Datatel’s board.

Headquartered in Fairfax, Va., Datatel provides information management solutions for higher education institutions, helping them operate more efficiently so they may better serve their constituents. With approximately 650 clients, Datatel earned more than $95 million in consolidated revenues last year. Bravo declined to comment further on the company’s financial status other than to say it is “very profitable.”

According to Bravo, Datatel’s software is capable of running all mission critical systems of a college or university including financial aid application processing, student billing services, human resources, payroll, class enrollment and maintaining student records and transcripts.

“The macro trends are fantastic,” Bravo said. “People keep spending more and more on higher education, especially in the adult education arena. And while enrollment keeps going up, so do tuition costs, which means that more students are using financial aid…Colleges are finding themselves having to invest and upgrade their internal systems to keep up.”

Last year Datatel signed 31 new clients including Columbia Union College; Northern Lights College; Phillips Community College of the University of Arkansas and others, according to the company.

Bravo said that Datatel’s strong internal growth makes it a definite candidate for an IPO in the next five years, but that selling to a large strategic buyer is also a viable exit strategy. Right now, however, the goal is to keep Datatel’s internal growth strong while using it as a platform for add-on acquisitions, he said.

Thoma Cressey’s equity infusion for the deal will come from Thoma Cressey Fund VII LP, which closed in 2001 with $550 million in commitments. Once the deal is closed, Fund VII will be about 80% invested and the firm will likely hit the market for Fund VIII sometime this summer, Bravo said.

Trident is currently investing out of Trident Capital Fund VI LP, a vintage 2004 fund that closed with $400 million in limited partner commitments.

Credit Suisse First Boston will provide debt financing, Bravo said.

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