For sale - three sixth form colleges

Its not every day that someone gets the chance to buy three sixth form colleges. But, there appears to be exactly such an opportunity according to sources at EducationInvestor. So, how much are they worth?

The reliable specialist education publisher is reporting that the three Mander Portman Woodward sixth-form colleges are being offered for sale by their parent company BPP Holdings. The colleges are located in London, Birmingham and Cambridge.

It is claimed that the disposal is being arranged because the colleges are no longer considered core to BPP’s strategy (it has extensive interests in educational & professional publishing and training).

So who might look at this as a good acquisition opportunity? And how much might the businesses be worth?

According to EducationInvestor:

In its last results, covering the 14 months to 31 August 2011, MPW posted net profit of £3.0 million on turnover of £14 million. That’s up from £2.3 million and £12.6 million respectively the previous year.

In 2011, the firm also had net assets of £3.4 million.

That looks like a pretty healthy operating profit margin, although there appears to be relatively little revenue growth from the figures (remember: the latest figure of £14 million is for 14 months) - it looks like the colleges generate an average turnover of £1 million per month.

On a profits-multiple valuation, I reckon the takeover price might be around £12.5 - 17.5 million (approx 5-7 x profits) on a debt/cash-free basis. Much would depend on whether the potential acquirer saw the potential for stronger revenue growth in the colleges and also possible cost synergies.

Who might buy them? Possibly Pearson (who are buying almost anything that moves in education currently). More likely I suspect a private equity buyer. Or perhaps someone from left-field…like tutor2u?