Investors eye top private schools and SEN provision

CVC, the private equity group, has bought a 20% stake in an international group of private schools at a €7bn valuation, more than triple the group’s worth in 2021 and a sign of increasing buyout interest in the sector.

Last year private equity accounted for more than 90% of the total capital invested globally in mergers and acquisitions in the education and training sector, up from 83% the year before, according to RL Hulett.

Despite the removal of a VAT exemption for private school fees in the UK, deal activity is increasing here too. According to research by Ecclesiastical, two in five independent schools were merged or acquired in the 12 months leading up to June 2024. Several of those deals involved private equity groups seeking an opportunity to “roll up” private schools into larger groups with predictable cash flows.

Before announcing its stake in International Schools Partnership (ISP) last week, CVC, along with Blackstone, approached the UK schools chain Cognita to invest – but the deal stalled after the government’s introduction of VAT, according to reports in the FT.

Oakley Capital, a UK-based PE group, has shown a keen appetite for education. In 2023, it invested in Thomas’s Battersea, the school attended by Prince George and Princess Charlotte. It is also involved in IU Group and Affinitas Education and is a majority owner of Bright Stars nurseries. Inspired Education Group, a London-based business that runs 119 schools globally, has also taken substantial PE backing, including a €1bn minority stake from Stonepeak.

Top private schools aren’t the only area attracting interest. As public provision for special educational needs (SEN) schools fails to keep pace in the UK, private providers, some PE-backed, have entered the space.

As of January 2024, more than 1.6 million pupils in England had identified special educational needs, an 11.4% rise from the previous year. The IFS last year found that half of the increase in total school funding since 2015 has gone towards special educational needs, owing to the fact that local authorities have a legal duty to fund SEN placements.

According to Eclipse Corporate Finance, recent deals in the SEN sector include Apposite Capital's acquisition of Octavia House Schools, which has campuses in south London and Essex, and Innervation Capital acquisition of 10 SEN schools run by Melrose Education.

Most of the very top UK independent schools for A-level grades such as St Paul’s, Westminster, and Wycombe Abbey, remain charitable foundations without PE owners. But other notable performers including Oxford International College and Cardiff Sixth Form College have received PE backing.

Photograph by Kristina Blokhin