An Innovative Approach to Business Brokerage and M&A Fees
Working with a business broker or M&A advisor can significantly enhance your results when selling your business. At our firm, we recognize the distinct needs of each client and offer an innovative alternative to the conventional business broker fee structure. In addition to the traditional full-service commission or success-fee model, Jackim Woods & Co provides clients with the option to engage us as consultants and pay on an hourly basis, offering a more personalized approach tailored to your requirements.
Our innovative hourly billing option allows you to access our expert services as needed, ensuring you only pay for the specific assistance you need, resulting in significant cost savings. Regardless of the fee model chosen, we are committed to providing exceptional services and outcomes aligned with your unique objectives.
Deciding Between Fee Structures
Success-Fee Basis
PROS:
- Aligned Interests: Our fee is contingent upon the successful sale, aligning our interests with yours and motivating us to get the highest price for you.
- Minimal Upfront Costs: With only a small retainer upfront, you can minimize initial expenses.
- Confidence in Broker’s Ability: Our willingness to work on a success-fee basis reflects our confidence our ability to sell your business.
- Risk Mitigation: If the deal falls through, you incur no financial obligation other than the initial retainer, thereby reducing your financial risk.
CONS:
- Higher Overall Cost: The success fee, a percentage of the sale price, will usually result in higher costs compared to hourly billing.
- Focus on Larger Deals: Brokers may prioritize larger deals due to their compensation being tied to deal size.
- Possible Rush to Close: There’s a risk of prioritizing closing the deal over negotiating optimal terms for you.
Hourly Basis
PROS:
- Cost Control: Hourly billing offers predictability and manageability, especially for smaller transactions or prolonged processes, ensuring you pay only for the services you need.
- Flexibility: You can tailor our services to your needs, from brief consultations to having us run a comprehensive sell-side process for you.
- Objective Advice: Our fee structure ensures impartial advice focused on your best interests rather than simply closing the deal.
- Transparency: Transparent billing simplifies expense tracking and comprehension.
CONS:
- Upfront and Ongoing Costs: The hourly fee is due whether the deal closes or not, so the cost to you may be higher than the initial retainer under the success fee based approach.
- Less Incentive to Close Quickly: Because we are solely focused on providing you with impartial, objective advice, it could potentially prolonging the process.
Case Study
Recently, we assisted the owner of a medium-sized court reporting firm in California. With a business valued at $1M, she sought our expertise in navigating a sale. She had already been approached by several buyers, so she just needed our help determining what her firm was worth, analyzing each buyer’s offer, providing assistance in negotiations and counterproposals, and help responding to the buyer’s due diligence requests. Since she didn’t need us to run a full sell-side process, the consulting model was ideal for her. Typically, brokers charge an 8-10% success fee, translating to $80,000 in this case. Opting for our hourly consulting model, she saved a substantial amount. With 40 hours of consulting time spent, including valuation, negotiation, and due diligence assistance, her total fee amounted to $15,800, saving her $64,200 compared to the traditional business broker commission model.
Conclusion
Recognizing the uniqueness of each client’s needs, we offer both traditional commission and consulting fee models. Whether engaged using a success-fee arrangement or hourly billing, our commitment remains steadfast to providing top-tier service tailored to your objectives.
About the Author and Jackim Woods & Co
Rich Jackim is an attorney, investment banker, and entrepreneur. For the last 25 years, Rich has been providing boutique investment banking services to small and middle-market companies in over 30 industries.
In addition to running a successful M&A advisory firm, Rich founded a successful training and certification company called the Exit Planning Institute, which he sold to a private family office in 2012.
Rich is also the author of the critically acclaimed book, The $10 Trillion Dollar Opportunity: Designing Successful Exit Strategies for Middle Market Businesses. It became an Amazon best-seller in the business consulting category the year it was published.
If you own a business and are interested in exploring your options, I would welcome an opportunity to speak with you. There is no cost or obligation to you and all discussions are completely confidential.
Feel free to contact me at 224-513-5142 or rjackim@jackimwoods.com.
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You Don’t Know What You Don’t Know: Selling an RV Dealer
If you’ve ever heard the saying, “You don’t know, what you don’t know,” and never understood it, I was there also. I sold my family business about 18 months ago to a much larger company. At the time, I thought that knew a lot about the RV industry, after all, I was a third-generation owner. I figured if my grandfather and father had been successful for over 50 years, what they’d taught me ought to be enough. That idea, that concept embedded into the depths of my thought, couldn’t have been more wrong. I soon would learn “what I didn’t know.”
The first six months were really a blur. Our projections and goals were constantly changing based on more growth than I ever could’ve imagined. All of the new tools and information I now had at my disposal were amazing. Any question I had could be answered, and hunches could now be backed up with quantifiable data. I’ll admit it was a bit of an overload at first, but now it has become normal.
To people that have been brought into the light after having been in the dark, the world seems amazing, and this is how I felt. Along with this amazing feeling also comes a bit of shame. I now can say, “I didn’t know what I now know.” Shame comes from knowing that in 50 years of business, we never truly grew. Not when I came home from college with all my “fancy” degrees and learning. Not from an evolving economy. We only focused on small, consistent growth that was very risk-averse and preservation-minded. Debt was always considered bad. Sure, we made a great living, but now I know what could’ve been.
So to all those out there who “don’t know what you don’t know,” I suggest you learn before it cost you as much as it cost me. Sure, it cost me in the valuation of my company, but most of all, it cost me years of personal and professional growth. Now I am always searching for ways to improve, so if I am ever in the same position, my “don’t know” won’t last very long.
If you own an RV dealer, supplier, or OEM and would like to explore your growth options or exit options, I would welcome an opportunity to speak with you. Feel free to contact me for a confidential, no-cost, no-obligation consultation at chudman@jackimwoods.com or 208-521-1521. I look forward to speaking with you.
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How to Maximize the Value of Your Injection Molding Business
The best way to maximize the value of your injection molding business is to start at least 3-5 years before you want to sell.
The following nine steps will make a big difference in how many buyers will be interested in your molding operation and how much they will be willing to pay you for it.
Focus on Profits, Not Revenue
Focus on increasing profits, not revenue. The value of your business is a function of how much profit it generates, not on its revenue. So do whatever you can to focus on adding profits to the bottom line. That could mean turning away low-margin business and making time on your equipment for more profitable work. You might also take a look at the equipment that isn’t being fully utilized to take on some low-margin work to keep that equipment working. If your fixed costs are covered, that incremental revenue will fall straight to the bottom line. Finally, do whatever you can to eliminate unnecessary expenses. This takes time and effort, which is why it’s important to start 3 to 5 years before you want to exit.
Work With a Good CPA
Having accurate financial statements is crucial. It’s not necessary to have audited financial statements, but you should have them reviewed, not simply compiled, by a reputable accounting firm. This will cost extra money, but it will pay off during the sale process.
Prepare Forecasts
Buyers are buying the future performance of your business. As a result, it is important to have a clear vision of what the future of your business looks like and to be able to share that with potential buyers. This means understanding, to the extent possible, the future needs of your customers, any major new projects in your pipeline, as well as any capital expenditures that may be required.
Eliminate Any Unneeded “Stuff”
If you have obsolete or non-operating assets in your business, get rid of them. Sell or dispose of any old, unusable raw materials, or damaged finished goods inventory. This includes old, broken-down molds, old equipment, etc. Getting rid of this stuff will clean up your production area and make it look more spacious and efficient. Once you’ve disposed of unneeded inventory and equipment, be sure to remove it from your balance sheet as well. The cleaner and more accurate your financial statements are, the better.
Make the Place Look Good
If you want to sell your home, you fix it up and keep it clean. Do the same with your injection molding operation. Look at your business through the eyes of a buyer. Are the windows clean and all the lights working? Are your office and production areas clean and well organized? What do the floors look like in your plant? Are they clean or are they covered in oil, solvents, and stains? If there are any deferred maintenance issues, take care of them before buyers tour your operations.
Be Prepared
You only get one chance to make a good first impression, so anticipate what buyers will ask for and have all the information ready for them when they ask for it. Work with an experienced mergers & acquisitions advisor to help you prepare an offering memorandum that provides an overview of your company. Work with your M&A advisor to set up and maintain a secure, online data room where you can upload all the information a buyer will need to review. This will save you a lot of time and minimize your stress when you decide it’s time to sell.
Make Yourself Obsolete
The more your injection molding business can operate without your direct involvement, the better. Buyers will discount the value of your business if it is heavily reliant on you. If you are heavily involved in day-to-day operations, put together a plan to develop your second layer of management and begin delegating some of your responsibilities to them. If you can take a two-week vacation without the business suffering, you will have succeeded in developing a business that is not reliant on you.
Talk with Multiple Buyers at the Same Time
It is very important to be talking to more than one buyer when you finally decide to sell your injection molding operation. It significantly increases your bargaining position and will motivate interested parties to submit strong offers. Work with an experienced M&A advisor to run a competitive process for you. A good M&A advisor will be able to generate multiple simultaneous offers and provide you with the negotiating leverage you need to get the best combination of price and terms.
Get Professional Advice
Selling your injection molding business may be one of the most important transactions in your lifetime. It is definitely not a “do it yourself” project, particularly if you have never bought or sold a business before. Build a team including a good attorney with M&A experience, your accountant, and an M&A advisor with experience in the injection molding sector.
If you follow these nine steps, you will be able to maximize the value of your injection molding business when you decide to sell.
Conclusion
If you’re interested in getting a ballpark idea of what your injection molding business is worth, check out the article entitled What’s My Injection Molding Business Worth? – Simple Rules of Thumb
If you’d like some help valuing your injection molding business, or would like to explore your options, I would welcome an opportunity to talk with you.
By Rich Jackim, Managing Partner at Jackim Woods & Co.
Jackim Woods & Co. is a leading mergers & acquisitions advisor focused on providing senior-level attention and flawless execution to clients in the injection molding industry.
Rich Jackim is an experienced mergers and acquisitions advisor and a retired mergers and acquisitions attorney. Rich has over 20 years of experience advising owners of middle-market companies and their boards of directors on mergers, acquisitions, and divestitures. During his career, Rich has been involved in over 70 mergers or acquisitions of middle-market companies worth over $2 billion. Rich is also the author of the critically acclaimed book, The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners.
To arrange a confidential conversation to explore your options, please contact Rich Jackim at (224) 513-5142 or rjackim@jackimwoods.com.
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5 Ways to Maximize the Value of Your Vocational School
If you own a vocational school, it’s important to understand the ways you can maximize the value of your school when you sell.
Over the last 12 months, there has been a lot of mergers & acquisitions (M&A) activity in the education sector. COVID forced schools to adopt distance learning, which has completely changed the operating model for well-run schools. Schools are now able to deliver high-quality educational outcomes without geographic restrictions or needing to invest in expensive brick and motor classrooms. This has allowed vocational schools to increase revenues while decreasing costs.
Strategic buyers dominated education sector M&A activity in 2020 and early 2021, but private equity groups and sophisticated investors are now seeing vocational schools with distance learning platforms as a new technology-enabled service platform, like EdTech.
If you own a vocational school and are thinking of selling, now may be a good time to explore your options. Unfortunately, many owners miss out on maximizing the value of their schools because they are unfamiliar with what buyers look for. Here are five things you can do to help you ensure you receive top dollar for your vocational school when you decide to sell.
Understand Who the Most Likely Buyers Are for Your School
Buyers of businesses with revenues of $1 million or less tend to be individuals who live within a 50-mile radius of the company they are interested in. However, as the size of your school increases, strategic buyers become more interested —and these buyers are typically not local. For vocational schools with revenues of $5 million and up, financial buyers, like private equity groups, as well as strategic buyers become interested.
What does this mean for you? If you own a vocational school with $1 million or less in revenues, your buyers—besides being local—will likely be first-time business owners, who are essentially looking to buy a job. As a result, your marketing materials and sales pitch should address the concerns these buyers have.
However, owners of larger businesses should be prepared to address the concerns of more sophisticated, financially-driven buyers. That means to maximize your sales price for your school, you will need to develop an offering package, including a pitch book, a financial model, and set up a virtual data room, complete with detailed historical financial statements and other information these buyers will ask for.
Understand the Value of Your Vocational School from a Buyer’s Perspective
Did you know that 80% of privately-owned companies that are listed for sale, don’t sell? The number one reason most schools don’t sell is that the seller has an unrealistic expectation of value.
As a result, one of the most important things you can do before starting the sales process is talk with an M&A advisor who has extensive experience selling vocational schools. They can provide you with an objective, third-party opinion of value using the same methodologies that buyers use. An M&A advisor who is active in the education sector can also give you advice and guidance on pricing trends in the industry and value drivers.
The more educated you are about the M&A market and vocational school valuation principles, the more likely you are to be successful when you sell your vocational school.
Set Personal and Financial Goals
An essential step in ensuring a successful exit is to have a clear idea about how much money you need to meet your financial goals. While this number is not related to the value of your school, it will help you evaluate opportunities and make the right decision.
For example, if you know you need $3 million, after-tax, to retire, and your school is valued at $2 million, it may not make sense to sell now. It may make more sense to spend the next 2-3 years preparing your school for sale so you can increase its value and meet your financial goals. Have an honest conversation with your financial advisor or wealth manager and do some retirement planning to figure out what you need to retire before you decide to sell your school.
Use the Right Process to Maximize the Value of Your School
The best process to use to sell your school depends on its size and market appeal. If your school has less than $2 million in revenue, the best process is the traditional business brokerage approach that includes listing the company on multiple M&A websites and responding to buyers when they request additional information.
However, for companies with over $2 million in revenues, it may make sense to run a controlled auction process. In this case, your M&A advisor will put together a targeted list of financial and strategic buyers that may have an interest in your company.
He will contact them directly and send them with a teaser that provides an overview of your school, but without disclosing its name or other identifying information. If buyers are interested, the broker will have them sign a nondisclosure agreement and send them a formal offering package.
A typical marketing program for a vocational school might involve contacting 100-200 potential buyers simultaneously. The goal here is to get as many buyers as possible looking at your company at the same time and to make them aware they are in a competitive process.
This has several advantages. First, it speeds up the transaction timeline, ensuring a faster and more efficient closing. Second, it ensures buyers put their best offers on the table first because they know other buyers are also bidding. Last, it provides you with negotiating leverage because you will most likely have multiple offers to choose from at the end of the process.
Don’t Take Your Eye Off the Ball, Get Help
Regardless of the size of your vocational school, the most important thing you can do is work with an M&A advisor to run the sales process. Running a sell-side process is time-consuming and you don’t want anything to distract you from the day-to-day operation of your school because a dip in revenues or net income during the sales process can have a big impact on the value of your business.
Selling a vocational school may be the single most important decision in your lifetime, so make sure you work with someone who is an expert in the process and can coach you along the way.
By Rich Jackim, Managing Partner at Jackim Woods & Co.
Jackim Woods & Co. is a leading mergers & acquisitions advisor focused on providing senior-level attention and flawless execution to clients in the education sector nationwide.
Rich Jackim is an experienced mergers and acquisitions advisor and a retired mergers and acquisitions attorney. He has over 20 years of experience advising owners of middle-market companies and their boards of directors on mergers, acquisitions, and divestitures. During his career, Rich has been involved in over 70 mergers or acquisitions of middle-market companies worth over $2 billion. Rich is also the author of the critically acclaimed book, The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners.
To arrange a free, confidential conversation about your options, please contact Rich Jackim at (224) 513-5142 or rjackim@jackimwoods.com.
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Year-End Checklist for Selling a Business in 2022
If you are thinking of selling your business in 2022 (or even 2025), taking the time now to get prepared and organized, will save time and effort in the future.
Here is a list of 12 things every business owner should review each year:
1) Financials: Every year, try to improve the quality and timeliness of your company’s financial reporting. The year-end is a good time to talk with your CPA about how to clean up your profit and loss statement and balance sheet and eliminate any line items that are no longer relevant. Work with your CPA to document and categorize any one-time expenses or personal expenses, so your CPA and your M&A advisor can help you calculate an accurate adjusted EBITDA for your business.
2) Due Diligence Checklist: Build a relationship with an M&A advisor and ask for an example of a basic due diligence checklist. Have someone in your company assemble as many of the items as possible and store scanned copies in a digital file storage area like Google Drive or Dropbox. This will save you an enormous amount of time and stress, especially if a great buyer suddenly shows up at your door. Work on it a little bit at a time (or delegate it) so it is not overwhelming.
3) Delegate: Think about your business and life goals. Are there things you want to achieve but have not been able to do because you are too busy doing other things? One way to improve the value of your business is to enable it to run without you. As a business owner, your role is to be a strategic planner and visionary. That means you need to delegate as much of your operating responsibilities as possible. Think about what you can delegate in the coming year.
4) M&A Advisor: Check in with an M&A advisor who you trust to discuss market trends, multiples, the pros and cons of your business, and get a valuation done. You should ask your M&A advisor to update your valuation every year so that you can make informed decisions about your options.
5) Sales and Marketing: Step back and consider your company’s overall sales and marketing strategy. If something is not working, try something new. Eliminate programs that aren’t working. Document everything so you can describe the strategy to a potential buyer.
6) Reduce Expenses: Have someone review expenses. Everything from paper costs to insurance premiums. Get new estimates on all major expenses. Every dollar you save goes to the bottom line, which is multiplied by the deal at the time of the sale. So if you can reduce your expenses by $20,000 next year, the value of your business increases between $60,000 and $140,000 depending on the industry you’re in and the size of your business.
7) Website, Social Media: If your website looks like it was made in 1998, it is time to invest in a new one. While we all know not to judge a book by its cover, most new customers and potential buyers judge you based on how your business presents itself online. So make sure your website looks professional, has accurate information, and works. If you have news, blogs, or social media posts, make sure they are up to date.
8) Tax Planning: Check in with your CPA and attorney to explore what you can be doing now to reduce or eliminate any capital gains taxes that will be due when you sell your business. Effective tax planning takes time but can save you a lot of money in the end.
9) Inventory: Make sure your inventory is current. Write off and get rid of any obsolete inventory.
10) Maintenance & Cleaning: Look at your business through a buyer’s eyes. Does anything need to be painted, cleaned, or thrown out? If a buyer called and wanted to meet with you tomorrow, would your business show well? Also, your employees will appreciate working in a clean, well-lit, and positive environment.
11) Financial Planning: Talk with your financial advisor to determine how much you need to net from the sale of your business in order to meet your financial goals. This does not affect the value of your business, but it does
12) Check in with your kids: The holidays are a good time to have an honest and open conversation with your kids about their goals and to see if they would be interested in taking over your business. Don’t wait until you’re ready to sell, to find out your kids always thought they would take over the family business.
It is not possible to address every item on this list at once. But, if you address one or two items a month, it will help improve the value of your company and make selling your business in 2022 much smoother.
Rich Jackim, is the founder of Jackim Woods & Co and the Exit Planning Institute. He’s also the author of The $10 Trillion Opportunity – Designing Success Exit Strategies for Middle Market Businesses.
If you are thinking of selling your business in 2022, contact Rich for a free, confidential, no-obligation consultation to learn about your options.
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SBA Payment Forgiveness Expected to Fuel Acquisitions in 2021
As was the case last year, COVID-related federal stimulus benefits are expected to be a powerful catalyst driving deal activity in 2021.
On December 27, 2020, Congress passed the Consolidated Appropriations Act, 2021, a $2.3 trillion stimulus bill, with $900 billion targeted specifically for COVID-19 relief. A portion of these funds will be used to extend the popular 2020 CARES Act SBA Debt Relief program.
According to Rich Jackim, Managing Partner of Jackim Woods & Co, the extension includes significant benefits that provide buyers with powerful incentives to acquire a business in 2021, including:
- Six months of payment forgiveness for SBA 7(a) loans closed after February 1, 2021, and before September 30th, 2021. This includes principal and interest up to a maximum of $9,000 per month. That’s a $54,000 benefit to buyers.
- The SBA will waive the guaranty fee that must be paid by borrowers. This fee is typically around 3% of the loan amount and will now be zero for loans closed before September 30th, 2021. That’s an average saving to buyers of approximately $4,500.
- The SBA is increasing the amount of loan guarantees to lenders from 75% to 90%. This will decrease the risk to lenders and help ensure liquidity for deal financing.
Jackim urges buyers who want to take advantage of the extension to learn from the mad rush to meet last year’s deadline. It required tremendous coordination between sellers, buyers, counsel, intermediaries, and lenders. “The lesson buyers learned last year is not to procrastinate and try to close at least 30 days before the deadline to accommodate potential delays,” says Jackim.
What does this mean for sellers? If you are thinking of selling your business, now may be the right time despite the pandemic. In addition to record low interest rates, the SBA Payment Forgiveness Program provides buyers with extremely low financing costs. Last year we sold two businesses for over asking price because the buyers were able to afford to pay more due to the 2020 SBA Payment Forgiveness Program. Once the pandemic is under control, it is unlikely buyers will have access to the same generous funding they have today.
To learn more about taking advantage of the 2021 SBA Payment Forgiveness Program contact Rich Jackim at 224-513-5142 or at rjackim@jackimwoods.com.
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Exiting Planning: The Key to a Successful Exit
Selling a business isn’t always about the price. It is not like selling a house where the most important factor is finding a buyer who is willing to make the highest offer. In fact, in my 25- years of being a business broker, I’d say that in roughly 20% of the deals, the purchase price was not the most important part of the deal. In the end, sellers are focused on achieving a combination of things, and maximizing the purchase price is only one of them.
Let’s examine some of the other most common goals and objectives sellers have.
- Maintaining the seller’s legacy. For one client, this means getting the buyer to agree to keep the company’s name (which was also the seller’s name) the same after the acquisition and not roll the company into the buyer’s parent company.
- Protecting Employees. For another client, they were the biggest employer in their small town, and the seller wanted to be sure that the buyer would not close down the plant, fire all the employees, and consolidate operations into their plant about 100 miles away.
- Participating in the Upside. Many clients want to remain involved in some fashion (usually in a passive or silent role) with their business after the sale. This often means accepting a lower price at closing but sharing in the company’s future growth going forward. This can be structured in several different ways, including a minority equity interest, a royalty on sales, or an earnout.
- Timing. Several of my former clients had very specific timing goals. In one case, it was due to the owner’s declining health; in another case, the owner’s son and key employee became disabled. In both cases, the owners wanted to sell as quickly as possible before the business suffered, and its value was diminished.
The best way to ensure that you achieve your goals when selling your business is to develop a comprehensive exit strategy before you start the sales process. This assures that everyone on your team is on the same page and is rowing in the same direction.
Rich Jackim, the Managing Partner at Jackim Woods & Co, is the author of the best-selling book, “The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners”. He has advised over 200 clients to create their exit plans and helped over 100 clients sell their businesses for a combined value of over $500 million. The book’s success led Rich to create the Exit Planning Institute and created the Certified Exit Planning Advisor (CEPA) program. He has trained over 300 lawyers, accountants, financial advisors, consultants, and business brokers to develop exit plans for their clients.
If you are thinking of selling your business in 2021 or beyond, contact Rich Jackim at 224-513-5142 or rjackim@jackimwoods.com for a FREE, confidential, no-obligation discussion about your options.
Read MorePrivate Equity Buyers Are Busy In Education Sector
Private equity investors have shown strong interest in education-focused companies in the last few years, and not just in edtech companies. Several things are responsible for this renewed interest.
- For the last 10 years, digital transformations in the classroom have caused the ed-tech market to soar and have led to an increased interest in all types of education-related investments.
- The U.S. faces a significant skill shortage across the board as our population gets older and as our society emphasizes professional careers over skilled-based careers. This had led to severe shortages in healthcare, the trades, and transportation.
- Approximately 30% of for-profit career colleges or vocational schools went out of business between 2008 and 2016, removing excess capacity from the post-secondary landscape, which led to a resurgence of interest from private equity groups.
- For the last four years, both the Republican administration and the Democratic Congress supported private education, which resulted in an upsurge in funding by federal, state, and local governments.
On top of that, the education industry is very fragmented, with many early childhood centers, career colleges, and training companies still owned by individuals, leaving private equity firms a lot of room for roll-ups to consolidate the industry and realize significant economies of scale.
In addition, the K-12 market has become more complicated, with new technologies rapidly changing the game. So having the right people in charge who know how to design and implement digital learning platforms is increasingly important, representing a unique opportunity for private equity and other tech-savvy investors. As a result, buyers and investors are spending more and more time developing world-class management teams to ensure their portfolio companies can provide teachers and students with the digital platforms and technical support they need to succeed.
For the past decade or so, buyers have been hesitant to invest in post-secondary education companies — ever since the Great Recession and implementing the Gainful Employment Rule during the Obama administration. However, things have turned around completely in the last four years for several reasons, including…
- Over 200 poorly run for-profit career colleges closed their doors before the 2017-18 academic year — continuing a long downward trend. But happily, at the well-run schools that survived, enrollment and revenue are rising again.
- The regulatory environment is more favorable because the Gainful Employment Rule has been greatly scaled back – even though it remains on the books for now.
- Most for-profit career schools are demonstrating better results regarding educational outcomes like gainful employment, making them more appealing to investors no matter the level of regulatory oversight.
- The education sector tends to do well in a recession. In general, post-secondary education does well when the economy slows down and unemployed people go back to schools, so education-related companies are a good hedge against recession in any investor’s portfolio.
- Valuations of early childhood centers, K-12 schools, and career colleges remain reasonable compared to other education sub-sectors like edtech.
- It isn’t just investors who’re interested in this space – lenders have returned as well. For example, Renovus Capital financed the Rasmussen acquisition with SunTrust, CIBC, and Bank of Ireland. NCK Capital financed its purchase of Tricoci in partnership with Greyrock Capital Group and NBH Bank.
That’s all good news for owners of education-related companies. Here are just a few of the deals in the education sector over the last few years —
- The Learning Experience, was purchased by Golden Gate Capital Partners Group-backed KinderCare Education, acquired Troy, Michigan-based Rainbow Child Care Center from Quad-C Management.
- Rasmussen College, a healthcare-focused career college system with 10,000 students across 22 campuses, was acquired by Renovus Capital Partners.
- The University of St. Augustine was acquired by Toronto’s Altas Partners in a deal worth $400 million.
- Allied Business Schools, which offers online real estate certification classes, was acquired by Colibri Group and Quad-C Management.
- Chicago-based Tricoci University of Beauty Culture was acquired by Dallas’s NCK Capital.
- Texas County Technical College in Houston, Missouri, was acquired by Arizona College.
- The National Business Institute of Florida was acquired by a private investor.
If you own an early childhood center, a Title IV career college, or a corporate training program and are interested in potentially selling, contact us at 224-513-5142 for a free, confidential, no-obligation discussion about the current market and your options.
About the author: Rich Jackim, the managing partner of Jackim Woods & Co, is an experienced M&A attorney, investment banker, business broker who has sold over 100 businesses. He is also an education sector entrepreneur who founded and sold a professional training company, so he understands the industry and the sales process from both an owner and a buyer’s perspective. If you are thinking of selling your early childhood center, K-12 school, career college, or training program, he would be happy to speak with you. His direct dial number is 224-513-5142, and his email is rjackim@jackimwoods.com.
