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Posted By Leadershipteam Limited on 22/10/2018

Is it time to sell my training business?

Is it time to sell my training business?

Owners and Directors of training providers approach us to sell their business for a range of different reasons – the following are the main ones:

They are fed up with the bureaucracy, constant change and lack of continuity in Further Education.

→ They are not confident of growing their business to another level.

→ They want to concentrate on another business opportunity.

→ The business has recently been hit by a bombshell (poor Ofsted, Clawback, Financial problems).

The above scenarios are mainly reactive and will not form part of a longer-term plan to maximise the value of the company. In fact, most of these people do not really want to sell at this time, they need help and guidance to negotiate their way through the immediate issues, solve the problems, put in place a plan for growth and work towards a potential sale 12-24 months ahead.

For those that really do want to get out – and get out now – they will need to accept that the value will be lower than their expectation and inevitably will not reflect the hard work and effort that they have put in over the years.

Whilst the valuation is influenced by (ESFA) contract values, Ofsted rating, future potential and sustainability, profitability is key; current valuations in transactions we are dealing with now are very much around profitability. Another important requirement for buyers is the track record so far in gaining and servicing Levy employers.

So, who are the buyers that want to purchase your company?

The Leadership Team currently has over 70 organisations who have asked us to find a training provider to buy and we have helped agree terms on 21 sales of training providers during 2018.

Those that are buying training 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.

6. Providers who want to access ROTO or ROATP who have been denied the opportunity to apply for these registrations for a long period of time.

What of the future?

Well, 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.

We believe that the ‘multiple of profit’ will increase significantly for those businesses that have a proven track record in delivering to Levy employers and who have contracts in place with employers for the future.

If you really do want to exit now, then there are buyers who will purchase your business.

However, we would recommend that you take a longer term approach, get some external expertise to help you build and grow and get all of the ‘plates spinning’, ready for a set point in the future where you can put the business up for sale at a realistic, achievable price that gives you the reward you deserve for all of that effort you have put in.

 

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

David.kitchen@leadershipteam.info

www.linkedin.com/in/dakitchen/

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