From education to employment

Who wants to buy a training provider?

David Kitchen is Managing Director of The Leadership Team, a specialist growth consultancy for the FE sector.

Business Sense by The Leadership Team.

People are giving up, letting their businesses go, getting out of the sector, fed up with the bureaucracy and the constant change in funding rules.

So, does anyone want to buy that company that you have invested so much time, money and effort in over so many years? Well you might be surprised to find that there are many who do.

The Leadership Team currently has over 50 organisations who have asked us to find a training provider to buy and we have helped 8 buyers match with sellers since Christmas 2017.

Those wanting to buy providers are coming from different directions:

  1. Ambitious providers with an aggressive growth strategy.
  2. Colleges looking to grow their apprenticeship provision and/or establishing a separate vehicle for apprenticeship delivery.
  3. Commercial training providers entering the funded market to enable them to continue working with their large employer clients via the Levy.
  4. Overseas providers looking to add global credibility with a UK provider in their portfolio.
  5. Existing providers looking to ‘start again’ and lose their legacy business (e.g. H&SC success rates).
  6. Providers who failed to either gain access to RoATP or the recent Non-Levy contract.

One of the main drivers of price is profitability and this is proving to be a low multiple of earnings. Another driver is contracts that have been secured with Levy paying employers over a medium term – i.e. 18 months+. There is still value however in ESFA contracts – Advanced Learning Loans and the Non-Levy Apprenticeship contract. ESF contracts carry no inherent value for obvious reasons.

Advanced Learner Loans is interesting considering Labour’s position, who have said they will abolish them in the event of taking power. Also, the Non-Levy contract has only a one-year shelf life before (in theory) all employers enter the digital system – there has to be a question mark over the value of this. As a result, many providers are looking to sub contract their Non-Levy contracts (only allowed of course if they stated this in their original bid).

Whilst there is a bit of a ‘rush’ to market because of the changing environment and shifting sands, the fundamentals of running a good business will not change. If a provider can secure good relationships (and business) with employers (large or small), can put effective delivery models in place that not only meet the needs of the external agencies and the employer but can also make it profitable, then there will still be a demand to purchase these businesses in the future. This would be based on the large employer/Levy delivery model being proved and sustainable going forward.

If you really have had enough and want to get out, then there is an opportunity now to do so. On the other hand, if you have the stomach for more change, can embrace the new environment and have a structured plan for exit, there is a great opportunity to build further value in your business before you hand the keys over to someone else.

David Kitchen is Managing Director of The Leadership Team, a specialist growth consultancy for the FE sector.

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