Opinion: Jeremy Harrison

As the end of 2011 beckons, it seems to be the year that the profit motive eclipsed long standing charitable status. The largest vocational skills training business in England, learndirect, was sold by the trustees of the charity Ufi to management and LDC. A different set of trustees is selling the College of Law if the rumours are true. That is nearly 50 years of combined charitable status swept aside amongst those two institutions alone.

However, the longevity of charitable legal status in the Higher Education (HE) sector stretches back somewhat further; hundreds of years in fact. For how much longer is one for debate. At present, a HE White Paper questions whether it should be made easier for institutions to change legal status to attract private investment. This would allow trade and private equity to buy stakes in UK universities to commercially exploit their degree awarding powers and content.

It is fair to say that some industry commentators have reservations given the American experience of ‘for-profit’ colleges. These, often lucrative, operations stand accused of churning out high volumes of meaningless qualifications in return for cut price tuition fees. Many of the criticisms are indeed fair, however, private investment is not necessarily a bad thing in my view. In an increasingly competitive global market for education, successful providers need to act with flight of foot to both attract students and deliver qualifications that have value to employers. This can create a need for capital and investment.

With UK Government finances ever strained, and HE in need of funding, I think that private sector involvement is here to stay. Those institutions that can successfully deliver our world leading brand of education, both here and abroad, should also be able offer the opportunity for investors to make good returns. The two objectives are not necessarily mutually exclusive. However, only time will tell whether the commercial case becomes convincing.

No doubt the recent investment by Palamon Capital Partners in QualitySolicitors will have caught the eye of many a private equity professional. Does this deal herald an impending wave of investment and consolidation in the legal services sector?

Clearly Palamon already understand and like investing in fragmented, professional services markets. Witness their investments in the dentistry and independent financial advisory sectors. Therefore, it would be easy to conclude that this is proof that external capital can also facilitate change in the conservative legal industry. However, and this is the important point to note, QualitySolicitors is effectively an introducer of cases, a brand manager and a direct marketing organisation, not a lawyer.

Now this type of business model is much closer to what private equity knows and understands. LDC and Inflexion are invested in National Accident Helpline, the personal injury claims manager, and we recently advised Lonsdale Capital Partners on their investment in financial claims manager, EMC Advisory Services. These businesses have more parallels to QualitySolicitors than a lawyer.

In truth, the investment case for putting money into multidisciplinary legal practices has yet to be proven.

Conde Nast, the publisher of Vogue, is to open a college of fashion and design in London next year.

This will be the first foray of an international, dare we say lifestyle, publisher into the education market. The plan is to offer foundation courses in fashion, interior design and decoration which may, in future, extend to degree level. This move ticks all the right boxes for Government at the moment: investing in skills within our creative industries where we have many world leading businesses (Burberry, Jimmy Choo, Vivenne Westwood) and securing new providers with a different approach to educating talented youngsters.

The odds are stacked against individuals looking to make money in the fashion and arts world – ask any aspiring clothes designer or artist. However, large corporate and private equity seems to be catching onto the idea of making a return from training those who want to chase the dream. Sovereign Capital’s recent investment in Brighton Institute of Modern Music (BIMM) was one of their first into the privately funded vocational training sector. BIMM students do draw on student loans for their degree level qualifications although I imagine a fair amount of their income from career development loans.

I think there is something really interesting about companies and entrepreneurs with a passion for their vocation running a commercial business teaching others. An FE college where the course is another one on the menu just can’t compete. As the Government encourages private providers in further and higher education I believe these type of deep, sector specialists will thrive and generate good returns for their owners.

From the 1 August 2011, the Skills Funding Agency (SFA) is introducing a Minimum Contract Value (MCV) of £0.5million for those vocational training providers who wish to contract directly with the SFA.

The objective of the SFA is clear – reduce the number of providers it has to manage to reduce the administrative cost of skills funding to the taxpayer. The theory goes that those small providers below the threshold for a direct contract will sub-contract to larger providers who will in turn provide oversight and contract management service to them. For a cut of the funding of course.

With nearly half of all skills funding shared amongst the top 100 providers there is a long tail of over 1,000 smaller providers who share the rest – many of whom will no longer be able to contract directly. Therefore, should we expect this to act as the Catalyst to drive a period of rapid consolidation in the sector?

In the short term I think the MCV is unlikely to create a wave of consolidation. Many successful providers already sub-contract to colleges anyway (who are exempt from the MCV requirements), there will be exemptions for ‘special cases’ and it does not change the fact that there are more sellers than buyers in the sector. The MCV is also too low to create a churn of providers that are really worth acquiring – buying 10 businesses to acquire less than £5million of SFA revenue is very hard work indeed!

The sector must consolidate and in my opinion a longer term contracting regime would be a more meaningful way to achieve it. This would offer providers, and investors, more certainty to invest in their businesses and aggressively pursue acquisitions. However, it is fair to say the buy and build opportunity does exist out there, for those brave enough to grasp it.

It seems the dismal weather we have seen this summer is not helping the traditional package holiday companies. Thomas Cook recently issued its third profit warning of the year and its share price is in freefall as I write. (190p to 67p since January 2011)

Despite this every cloud has a silver lining and in our opinion this is an interesting space and one where consolidation is very much on the agenda. The package holiday model is looking increasingly dated. Market share is being lost at an alarming rate to the more independent holiday model, aided by the internet and low cost airlines. It seems the traditional business model which includes high fixed costs, leveraged balance sheets and a number of other concerns mean significant forecast risk.

There are a number of issues that have spooked the markets among them speculation that the company will breach its debt covenants if net debt keeps rising and if there is a failure to sell off over £200m of assets including hotels and other property in continental Europe. The company argues that cash flows are still strong and after successfully negotiating a one year extension of its bank loan and revolving credit facility there is no reason for immediate concern.

However in our opinion consolidation it is still a better option than going it alone and the news of a possible merger with the Co-Operative Group (Competition Commission to rule on 16th August) is hardly surprising. The cyclical nature of the business means a repeat of last years Siberian winter with its consequent flight cancellations and postponed holiday bookings and the possibility of a breach of covenants becomes a probable rather than a possible occurrence.

For me this represents an interesting time for tour operators. Recently released figures show bookings being down on average 15% on two years ago. The trend for last minute discounts, fluctuating fuel prices, rising hotel rates and the knock on effect that the EU Emissions Trading scheme is set to have air passenger duty. We see definite opportunities to purchase attractive assets at below market value as the industry shifts away from the traditional package holiday sales to more flexible business models.

The leisure and travel market continues to be a market I follow closely, and in light of the above I am convinced there will be attractive opportunities on the buy-side and the sell side with undervalued but attractive assets coming up for sale. For the mid market, and particularly owner managed independent leisure firms, the possibility of a lucrative exit strategy or a tie up with one of the bigger players seems more tangible than ever.

Interesting times ahead for people looking for a deal.

Following their recommended offer, Pearson look set to snap up EDI plc imminently. This will add another likely beneficiary of the Coalition’s support for apprenticeship schemes to their stable.

EDI, a specialist provider of work based learning materials and accreditation services to employers and trainers was an obvious buy for Pearson following their £100m acquisition of Melorio last year. The offer price values EDI at £113m which, at face value, looks like a full price. However, as we often experience when selling businesses, strategic buyers are often willing to pay strategic prices for quality assets. So why is EDI a strategic asset for Pearson?

Firstly, the market EDI operates in is an attractive one with long term growth drivers. Higher tuition fees, persistently high youth unemployment and the withdrawal of the Educational Maintenance Allowance continue to make work based learning, which allows students to ‘earn while they learn’, increasingly attractive compared to school and college courses.

Secondly, scarcity value. EDI is the only vocational accreditation and qualification business of any scale that Pearson could buy in the UK given most are industry specific trade associations.

Thirdly, soft synergies. EDI happens to share a similar international outlook to Pearson having successfully exported its LCCI International accreditation brand to over 120 countries.

So, many an M&A adviser will be wondering what their next move will be and whether their client is the next strategic asset! My view is that further buys in vocational training are likely although whether that will be more of the same or a buy in the employer funded arena remains to be seen. On previous form, they tend to acquire scale so picking the next target in the fragmented training sector is not as hard as it may first appear!

I've been reflecting this week on figures out recently which show that UK consumers spent £6.8 billion online in December, up more than 25% on the same time in 2009. No doubt some of this increase will have been driven by the heavy snow and impending VAT increase, however, even allowing for this, there is no doubt that the rampant increase in online shopping continues apace.

Morrison's certainly seem to believe that the online channel is the growth engine of most retail businesses these days as demonstrated by the handsome price they paid for nursery and baby products retailer Kiddicare.com recently. The reputed price (two times revenue, twenty times profit) brings back memories of the dot.com boom years although businesses like Kiddicare tend to have robust business models generating profit and cash these days. Justifying these prices is possible for the likes of Morrison given their scale and the strategic benefits of capturing systems and expertise that exist in businesses like Kiddicare.com.

I expect the grocers and our treasured high street brands to remain active in seeking out and possibly buying online retailers who lead their respective niches. With a number of great online retailers listed on AIM or backed by financial investors, the likes of ASOS, M&M Sports and Wiggle spring to mind, it seems likely that there could be further instances of ‘bricks’ buying ‘clicks’ in the next 12 months.

Responses to the CSR have been flooding in since George Osborne stood up in the Commons, and it is telling that a 25% cut in Further Education (FE) funding is considered a good result for the sector!

This is maybe not so surprising though given that Higher Education (HE) was on the receiving end of a 40% cut (even if Lord Browne did recommend that students plug the future shortfall). Across both areas it seems like there is increasing momentum behind the term ‘co-investment’. The individual and employer who benefit from the acquired skills will pay more for the privilege and the taxpayer less.

Perhaps more interesting is the rhetoric from those representing training organisations, both private and public, that spend from the taxpayer’s purse. The Association of Learning Providers (ALP) has been reiterating the mantra that the way to do "more for less" is to allow private providers open access to the FE budget. In turn, the Association of Colleges has been emphasising the need for a level playing field with schools and their sometimes inefficient sixth forms. It seems that both associations and their members have an eye on cash ring fenced for others.

Competition for funding is only going to get more intense.

It is often said that recession can offer opportunities for the successful in any industry to increase market share and profit. The public sector is having its own recession starting now - the opportunity for successful private providers and colleges to prosper seems clear.

Pearson certainly know how to spend in the education sector. Following their sale of Interactive Data Corp for £1.3 billion in May, cash seems to have been burning a hole their pocket.

The global roll call of acquisitions in 2010 started here in the UK with government funded vocational training business Melorio plc for £99 million. This was followed in July by the acquisition of the learning systems and school materials business of Brazil based Sistema Educacional Brasileiro for £326 million. Two further acquisitions across the pond followed shortly thereafter, namely the international English language school Wall Street Institute (£60 million) and private equity backed school improvement service provider America Choice (£50 million). I make that about £500 million spent to date, over £500 million of the cash pile to go! The question is, who is next?

The analysts and brokers point towards their interest being strongest in international education (non-US), for example Pearson is still relatively small in the Middle East. Pearson also cite bolt on acquisitions as a core part of strategy for their FT Group and professional services division. Personally, I expect vocational training businesses, particularly those that can leverage existing Pearson content, and scalable digital assets to be right at the top of their shopping list.

The collapse of Goldtrail, Kiss Flights and Sun4U highlights the strain on packaged tour operators and online agents at present. Certainly in the case of Goldtrail, it appears that the CAA / ATOL ‘safety net’ has acted as intended, successfully repatriating an estimated 15,000 UK holiday makers from abroad. Good news for the consumer.

However, given the headline grabbing nature of the failure, and the column inches it has attracted in the popular press, the question one may pose is whether consumers will become increasingly wary of booking their own flight and accommodation packages. These are often booked through one of the many online agents and now account for the majority of holidays booked in the UK today.

Certainly the peculiarities of the ATOL and ABTA bonding schemes and the secondary protection from credit card companies does appear to confuse consumers. However, cover for the eventuality that your tour operator or agent does indeed go bust does exist widely for those who seek it (through travel insurance, paying by credit card or by informed choice of agent).

So while people maybe a little more conscious of who they trust with their cash and holiday plans, l can only see the proportion consumers browsing for holidays online to book flexible, tailored travel at a competitive price increasing. I still expect the best online agents to flourish and represent an attractive investment opportunity.

It is summer, it's academic results season, and we love to fret about deteriorating standards in our higher education establishments. In contrast, the value of a UK degree to overseas students, and more importantly their fee paying parents, is a strong as ever (particularly in Asia and the Far East). This is why many queue up to pay substantial fees to study here, fees that in turn partly subsidise their domestic counterparts.

The value of UK degrees has clearly been illustrated by the princely sum recently paid for BPP last year, the only for profit degree awarding body in the UK. The £368m was stumped up by Apollo Global, a subsidiary of American education behemoth Apollo Group who own the commercial powerhouse that is the University of Phoenix.

Why have they made their move now? Well, it seems inevitable that Government coffers will no longer stretch to subsidising degrees for all. Indeed, many students will have to start paying the true cost of a degree in the future (about £10,000 in real money). In conjunction with a Coalition Government who favour private providers competing with universities to award degrees, this means there is clearly a recipe for private organisations to make money in the future.

As a result, many are desperate to gain entry to the UK Higher Education sector and, if further evidence was needed, witness the news yesterday that BPP has been awarded coveted University College status. This status is so special it has been immediately reflected in their name, herald the beginning of BPP University College and a more competitive, for profit, degree awarding sector.

It appears that making money out of selling mainstream holiday packages is a difficult business these days – witness recent interim losses reported by Thomas Cook and TUI Travel.

The mainstream package holiday market is mature, competitive and low margin, whilst operators need to be particularly adept at controlling costs while accurately matching supply with demand. This is before contending with the challenges of consumers increasingly constructing DIY holiday packages, the odd failing airline, unpredictable foreign exchange movements and the occasional ash cloud! In contrast, the specialist travel market is somewhat more attractive. The experience, destination or bespoke service being sold is usually more important than price, leading to higher margins, while it is a market that continues to grow in totality.

The expertise, brands and customer loyalty of many of these businesses has often been built over years by entrepreneurs with a passion for the product. This appears to have led to a number of mid market businesses dominating particular travel niches. This is a difficult attribute for large corporate businesses to replicate effectively and, as such, they have resorted to acquiring specialist travel businesses in recent years to access growth and profits.

Indeed, the most prolific acquirer, TUI Travel, recently announced the issue of a £550m bond to fund, in part, further acquisitions. This is after acquiring twelve businesses in their most recent full financial year alone, eleven of which they described as in specialist sectors and included a yacht chartering business and a number of school trip, adventure and sport tour operators. Other notable examples include Kuoni who bought luxury tour operator Carrier and Wyndham’s acquisition of holiday park, cottage and boat holiday business Hoseasons.

So for those entrepreneurs and private equity owners of successful travel specialists out there, one suspects that a ‘knock on the door’ may not be fair away.

The coalition Government has been in power about 9 and half weeks and the impact on the education and training sector has certainly been marked (with a knife!)

The Rt Hon Michael Gove, Schools Minister, has recently announced the axing of all Building Schools for the Future schemes that have not reached financial close, abolition of the ICT procurement quango Becta and the raiding of the Harnessing Technology Fund to provide some cash for the much vaunted free schools initiative.

Not to be outdone, the Rt Hon Vince Cable, the Business, Innovation and Skills Secretary, has cut and redirected funding away from perceived failing Labour training programmes such as Train to Gain towards apprenticeships and urgent college building programmes following the abolition of the shambolic Building Colleges for the Future initiative in 2009. Then there are the swingeing funding cuts announced to the Skills Funding Agency and Young Persons Learning Agency that will inevitably define the scope of their future roles in administering vocational training funding.

Finally, there is the Rt Hon Iain Duncan Smith and his Department for Work and Pensions, who have recently given notice of the termination of the Flexible New Deal (FND) welfare to work programme (just over one year into the five year prime contracts that commenced in October 2009). They are now asking for tenders for the participation in a rather vague framework for the provision of employment related support services which will replace FND in April 2011.

What does this mean for private equity and their interests in the education and training sector? While a looming fiscal crisis arguably required this degree of political ‘shock and awe’, it is certainly unlikely to encourage long term investment by private equity in the sector. However, while the road maybe rocky for their portfolio businesses in the short term, such significant and rapid change does also lead to opportunity. Those businesses and investors who are able to react and exploit an education and training market that is going to feature more, rather than less, private sector involvement in the future could well emerge stronger, and richer, from the austerity age.

The £100m plus acquisition of Melorio by Pearson has certainly raised some eyebrows amongst the established fraternity in the vocational skills training market. Most of those I speak to seem to welcome the entry into the sector of such a highly regarded and respected company. The question they ask me is, could Pearson be buyers of our business in the future?

In the wake of a period of aggressive consolidation led by Carter & Carter, one that ultimately led to their demise, Melorio was floated as the new sector consolidator in 2007. Following the acquisition of Construction Learning World at float, Melorio never really gathered a head of steam on the buying front and indeed ran out of proverbial puff after the acquisition of Zenos in 2008. Not surprising in many respects given that the equity and debt markets were drying up at this time and the environment for attracting additional LSC funding became increasingly challenging and uncertain.

In a sector characterised by the fact that there is more sellers than buyers, many ask whether Pearson will use some of their cash pile to reinvigorate consolidation in the UK vocational skills training market. Personally, I think the hopes of a new white knight maybe dashed. Pearson, and its education content business, spans the entire globe and applying the highly successful Zenos academy model into overseas markets appears to be their priority in the short term.

Whether it is financial institutions or volcanos, Iceland cannot keep out of the headlines! Following a difficult 2009, with consumers reigning in spending on travel by 8% from the year before, 2010 was set to be a year of modest recovery for the travel industry – that is according to the recently published Kelkoo European Travel Index which forecast growth of 2% in 2010.

Whilst the unprecedented tectonic related disruption will clearly have had a detrimental impact on industry profits, reassuringly it seems that forward bookings for most UK travel businesses are some way ahead of the same point last year corroborating this conclusion.

However, for me, the most revealing feature of this research is that we Brits appear to be the most savvy buyers of travel in Europe – nearly three quarters of us use the internet to research and buy our holidays compared to the European average of just over half. This fact ensures the UK is home to the largest online travel market in Europe and many of its leading businesses. Indeed, the UK online travel market is predicted to deliver yet more recession busting growth in 2010 and is now expected to be one third larger than just two years ago.

It is fair to say, this trend has not gone unnoticed by another one of our leading industries, namely private equity, whose investments in recent years include Expotel, On the Beach, Iglu and youtravel to name just four. The continued consumer migration towards buying travel online, the ability to rapidly scale revenues and an attractive landscape for selling at the right time to one of the acquisitive European travel majors suggests that the dynamics for achieving good returns from this sector still look pretty compelling, and it is certainly a part of the sector I think will remain vibrant for some time to come.

Over the last five years, VT Group has built one of the largest educational services and vocational training businesses in the UK. Their services range from the provision of computers to schools under BSF through to Government funded training of teenagers in the art of cookery and hospitality. With a large cash windfall for acquisitions from the sale of their stake in the BVT joint venture last year, they were seen as the obvious acquirer for many education service providers and technical training businesses that resided in private hands.

However, with the news that VT and Babcock are to tie up to create a new giant, the apple cart is somewhat upset" Many city commentators seem to be fretting that the acquisition will empty the pockets of Babcock and with the deal complete, a divesture of many of the proverbial non core parts of VT Group to raise cash seems inevitable. Aside from military training services, I would expect many of the education and training activities undertaken by VT Group to be on the stocks. No doubt the private equity community is keeping a watchful eye on events.

It seems that funding cuts recently announced in the pre-Budget report will heap yet more pain on the university sector. Indeed, The Institute for Fiscal Studies thinks the knife could cut much deeper post election highlighting the fact that the unprotected, big spending, departments like higher education, defence and transport could all see annual reductions to their budgets averaging 5% in each of the next three years. This, they argue, is necessary to protect spending in the ring fenced departments like health and schools while credibly reducing the deficit.

With a strain on university finances already apparent given swollen student numbers, I read with interest the recent announcement that Cambridge University is planning to raise £300 million of capital from the bond markets. This is the first time in its 800 year history that it has borrowed a meaningful sum of money and follows in the wake of a number of other universities that have announced similar plans.

Of course, this is nothing new. On the other side of the Atlantic, the ‘Ivy League’ universities have long borrowed from the capital markets reflecting their commercially shrewd outlook and their lower reliance on state funding. However, I think this development does signify the start of a gradual shift in the UK towards universities becoming more independent from central Government. I expect them to increasingly raise capital privately, broaden their range of commercial activities, enter more partnerships with business and exercise greater control over their admissions and course programmes.

Clearly one should not underestimate the challenges universities will face transitioning away from the state. Without doubt, some will succeed where others will fail. However, the long term trend seems clear; universities will increasingly access the banking, bond and private markets to fund their development which should open a whole new sector of investment to financial institutions.

Headlines over the last two years have been pretty depressing no matter who you are (unless you are a paid economist of course!).

Consumers have been bombarded by a relentless torrent of bad news which they may, or may not, also be experiencing first hand through unemployment, weaker promotion prospects and lower earnings. This appears to be driving consumers to the point of seeking an escape from reality manifesting itself in increasing participation in low cost leisure pursuits, staying at home and consuming more media. Nothing like taking the proverbial ‘mind off things’.

With a weak final quarter of growth recently announced for 2009, the prospects for a rapid change in consumer psychology is limited. Indeed, there is a school of thought that these changes will become ingrained and shape consumer attitudes when economic circumstances improve. Consumers will be more choosy about how they spend their money and they are likely to prefer cheaper options, such as the TV, on-line entertainment and outdoor pursuits. The desire to travel is likely to remain as strong (many have now tasted far away shores) particularly among the young - limited job prospects for middle class graduates often translates into travelling the world! However, for the wider family travel market, constraints on household budgets may mean many consumers will settle for destinations that are either less luxurious, closer to home or arranged and booked directly.

It also seems quite plausible that the more family centric leisure activities shaped by the recession will be here to stay. This will benefit a host of markets from indulgence foods, take-aways and alcoholic drinks through to gardening, gaming and internet services, 5-a-side football and DIY. Many of these sectors have been unloved in recent years, although their long term prospects for growth now look appealing and robust.

What does this mean for deals? More private equity investment in these areas and better prices for sellers.

2009 was the year Flexible New Deal went live heralding the end of a multitude of Government funded programmes aimed at getting the unemployed off benefit and into work. Following the DWP announcement of prime contractors, which included a few surprises, the focus last year was centred on the ‘merry go round’ of prime contractors securing sub-contractors to deliver the programme.

The hiatus has now passed and it seems increasingly likely that a flurry of deals may follow suit in 2010. At the smaller end, most businesses focused on Government funded skills training have experienced a turbulent year and have an envious eye on the security of a five year DWP contract with learner volumes driven by recession. This will encourage some to buy into the market.

More interestingly, the market is still fragmented with no natural counterweight to Serco’s presence. Given the prevalence of private ownership in the sector, it seems likely that sellers of businesses will exist for those investors willing to buy into or build presence in this space. Witness the management buy-out of JHP Training backed by Lloyds Development Capital announced recently - I do not expect this to be the last private equity investment in the sector in 2010.

Branded consumer product businesses were highly sought after assets at the top of the economic cycle. Double digit profit multiples were paid for leading consumer brands and retailers including Jimmy Choo, Fat Face and Farrow & Ball. However, they quickly fell out of vogue when the threat of the UK consumer deserting the UK high street loomed large.

The Christmas trading statements of the UK's leading retailers have made interesting reading with John Lewis performing particularly strongly over this period. The main conclusion drawn from these results is that the brand conscious UK consumer has proved more resilient than many expected through the downturn and therefore investors are already beginning to look at who the winners and losers are. The usual question for an investor or bank to ask when assessing a consumer business is "How did they perform through the last economic downturn?" Historically we had to cast our minds back a number of years to answer the question, however now the question is "How has the business performed over the last 2 years?"

So who are the winners and losers? There has been a lot written about the success of the discount retailers and the demise of the luxury brands, however this is a very polarised view of the market and the majority of consumer businesses do not fit either category. There have been winners and losers across the spectrum and the key to success has been who has trusted their brand strategy and correspondingly delivered a product that their target customer wants at the right price point.

Buyers of consumer brands are back in the market and looking for bargains. However, if you are thinking about selling my advice is not to start discounting the valuation of your business. You have been successfully marketing your product offering over for the last 2 years in a difficult economic environment so don't forget these principles now when considering whether to sell your business.

Hot on the heels of the joint Apollo / Carlyle acquisition of UK based BPP plc, the London based international buy out house BC Partners has sent money back across the Atlantic having recently acquired US vocational training specialist, ATI Career Training Center, for $500m. In common with Apollo, albeit on a smaller scale, ATI is a leading provider of vocational diplomas, certificates and associate degree programmes through their training centres across the States.

Given this deal was, in effect, a secondary buy out it will be interesting to see whether the next stage of corporate development, and growth in shareholder value, involves acquisitions. BC Partners are quiet on high level strategy in their deal announcements although the sophistication and maturity of the career and professional development training market in the US is well known – witness the scale of the likes of Apollo, Career Education Corporation, ITT and Bridgepoint Education. This suggests to me that overseas acquisitions could well be on the corporate agenda and, given the residency of BC Partners, that could well include within the UK.

What do plumbing, IT support, social work or accountancy have in common? Answer, the chances are that a handful of those that count themselves as one amongst these professions were a former steel worker, milkman or, increasingly, banker!

The career change phenomenon is nothing new and many training businesses exist out there to help learners fulfil their dreams. This comes at a price, and in the past this was often paid in cash up front on the interest free credit card or by way of personal loan. Ultimately, this led to many trainers becoming addicted to the cash now, training later model.

With personal credit difficult to obtain, trainers are finding those ‘cash rich’ learners harder to come by whilst they continue to deliver some existing programmes when the cash has long been spent. This breeds opportunity for those with robust balance sheets and access to capital, those very providers who are now able to operate ‘pay as you go’ programmes. In the next few years, I expect some of those career change trainers with strong brands, yet weak finances, to be ripe acquisition targets.

The postman will have recently shocked many Government funded training providers with their annual Maximum Contract Value (MCV) letters for the forthcoming academic year. These MCV's are nothing new, only now they mean something as the near defunct LSC (and its successors) undertake a seismic shift from largesse to austerity.

For the uninitiated, these pieces of paper were often meaningless if training providers could demonstrate learner demand and corresponding achievement. The LSC would simply pay up and many providers prospered from this stance.

That was then, this is now and the treasury is tightening the purse strings considerably (witness the shambles of the flagship LSC Building Colleges for the Future programme). These contract values are now real caps on turnover and growth and for many providers this means short term headaches. However, in the long term, I expect a leaner funding environment to accelerate consolidation in the sector given that organic growth will certainly become more challenging.