We appreciate the opportunity to showcase the enterprise value generated through StepEx’s deferred payment solutions in a recent transaction. Given the typically confidential nature of private equity deals, this transparency highlights how financial innovation can drive significant returns. To gain consent to publish this we have agreed not to reveal the shareholder and to make minor changes to the details that doesn’t change the ratios, only the quantum, in order to anonymise the deal.
Background
A UK-based provider of online courses was acquired by a private equity firm from its founders and original investors for £20m, representing a multiple of 1.2x revenue and 8x EBIT.
Deal Structure
The PE firm injected £6m in equity capital, with the remainder funded through secured debt.
Sellers were required to retain a significant portion of cash from the transaction in the business, to be released upon meeting key cash reserve milestones in staged tranches.
Sweet equity (management’s performance-linked equity incentive) was structured at 20% of the exit value over £20m at an 8% IRR.
Value Creation Strategy
The investment thesis centred on the belief that applicant price sensitivity was driven by an inability to pay upfront rather than an unwillingness to pay. This insight was validated through applicant research conducted before the transaction.
To address this, the transaction structure aimed to create cashflow flexibility, allowing the firm to introduce deferred fee payments for students. StepEx was engaged as the preferred deferred payment partner due to its ability to:
- Optimise the applicant journey through a fully automated credit decision system.
- Seamlessly integrate with the firm’s CRM and application process.
- Maximise repayment collection rates, ensuring sustainable cashflow and financial predictability.
Financial Performance Summary
| Metric | Purchase | Sale |
| Purchase Price (£m) | 20.0 | 42.0 |
| Equity (£m) | 6.0 | – |
| Debt (£m) | 14.0 | – |
| P/R Multiple | 1.2 | 1.5 |
| P/E Multiple | 8.0 | 10.0 |
| Revenue (£m) | 16.7 | 28.0 |
Key Takeaways for Private Equity Investors and Education Management Teams
- Deferred payment solutions can significantly improve conversion rates, boosting both revenue and EBITDA.
- Incorporating StepEx’s flexible financing model can drive operational efficiency and reduce marketing costs.
- PE investors can leverage innovative financing tools to enhance enterprise value and maximise shareholder returns.
Looking to replicate this success?
If you’re a shareholder in the education sector or an executive team looking to unlock greater enterprise value, contact us today to explore how StepEx can help you achieve your growth and financial objectives.
