April 30, 2012 – Palamon Capital Partners has concluded a transaction with Royal Bank of Scotland to provide a £23 million financing package for its portfolio company Cambridge Education Group which includes a dividend recapitalization for equity holders and additional debt financing for continued growth. The strength and profitability of Cambridge Education Group has allowed the company to secure a financing package including capital expenditure financing, mortgage backed and revolving credit facilities which will support its future growth. The financing has also enabled the repayment of Palamon’s initial capital plus a return of over 50%. Palamon and the management team continue to own a significant majority shareholding in the company.
“RBS has worked extensively with Palamon and have a good understanding of their growth investing model. We are therefore delighted to provide support to Cambridge Education Group, a fast growing and highly successful UK business. Under the leadership of a very strong management team CEG has clear drivers for future growth, which RBS is committed to supporting into the future,” said Peter Talbot Managing Director, Financial Sponsors, Midlands at Royal Bank of Scotland.
Cambridge Education Group (“CEG”) is a UK provider of pre-University foundation programs and English language training principally to foreign students keen to attend UK universities. Having identified the growing attractiveness of British education to international students Palamon acquired CEG in 2007 in partnership with a new management team led by Fergus Brownlee. Since that time, CEG has tripled revenue organically to £55 million by expanding its teaching capacity. Overall the number of students taught on an annual basis has more than quadrupled from 460 at the time of investment to more than 2,000 today.
“With Palamon’s financial and strategic support we have been able to execute an organic growth strategy that has tripled the size of the business in five years. With the additional backing of RBS we now have in place the facilities and capital structure to underpin the next stage of our development. We are delighted to have secured this backing,” said Fergus Brownlee, CEO of CEG.
This is the third dividend recapitalization that Palamon Capital Partners has completed since 2009. As Palamon’s growth investment strategy typically utilizes modest levels of initial leverage, recapitalizations have successfully been used to return capital once a business has achieved scale. In every case Palamon has maintained a stake in the on-going businesses as they enter a period of accelerated growth.
“With Cambridge Education Group, we have supported a well positioned company to execute a remarkable growth strategy. The business is on a clear path to continue increasing profitability significantly over the coming years by further developing its teaching capacity and enlarging its footprint,” said Dan Mytnik, Partner at Palamon Capital Partners.
Palamon Capital Partners was established in 1999 and makes investments of between €10 million and €80 million service-orientated businesses throughout Europe. Particular areas of interest include: media and communications; financial services; leisure and entertainment; business services; information technology; and healthcare. The firm has €1.1 billion of funds under management and is based in London, UK (www.palamon.com).
