Exclusive: Outcomes First sale starts with IM distribution

The sale of fostering and special educational needs provider Outcomes First Group (OFG), which is owned by private equity firm Stirling Square Capital Partners, has started with information memoranda (IM) being distributed to prospective bidders, our sister publication EducationInvestor Global has revealed.

The company, which has been marketed off an EBITDA of more than £110 million, is likely to reach a valuation in the 11-14x region, according to two sources familiar with the situation.

A third source tells HealthInvestor UK: “Outcomes First intends to get a valuation in the £1 billion region. The schools’ division performance is quite strong, the care homes’ one is good but the fostering service – roughly 30% to 40% of the business – is not seen as very bankable for infrastructure funds. So, the blended average probably can get to 1 billion +. The group would be pretty disappointed if it does not get to a billion.”

Our sources point to the difficult climate for fostering businesses and the possible repercussions of the Competition and Markets Authority (CMA) report on children’s services that was released on 10 March.

As for potential buyers, Onex is the name that everyone seems to think is around, according to one source.

Among the possible bidders that have shown interest in the asset are a few private equity and infrastructure firms, including Civitas, EducationInvestor Global and HealthInvestor UK hear from three sources. Centerbridge Partners, ICG have also shown interest in the sale.

The process follows an attempt to sell the business last year. Stirling hired JPMorgan and Moelis to run the sale in March 2021 but the process was delayed until the beginning of this year when it was finally relaunched, as reported by Mergermarket at the end of January.

Founded in 2013, the Bolton-based OFG operates more than 50 schools, 60 residential children’s homes, 20 residential adults’ homes, and more than 6,000 fostering places across the UK.

The company is the result of a consolidation project pursued by Stirling since 2015, when it acquired NFA Group, a provider of independent fostering services, by deploying capital from its £600 million third fund. The private equity firm subsequently boosted the company’s growth with the add-on of special educational needs provider Acorn in 2016.

In August 2019, Stirling’s NFA Group acquired Outcomes First from private equity firm Sovereign Capital, which had owned the company since 2013.

The group generated revenue of £365 million and gross profit of £164 million in the year ended 31 August 2020, according to its latest financial statement filed with Companies House.

Date published: April 1, 2022

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