The private equity sponsors of the Netherlands’ largest nursery-management software provider have hired investment bankers to explore an auction of the business, EducationInvestor Global can reveal.

EIG has learnt that Dutch private equity houses BB Capital Investments and Vortex Capital Partners have instructed Baird to find a buyer for KidsKonnect.

A sale is expected to launch in September, it is understood, with marketing materials to be distributed in the coming weeks. One source noted that vendor due diligence has been prepared – indicating that a process is imminent.

Marketing materials will show that KidsKonnect achieves “around” €5 million in annual earnings before interest, tax, depreciation and amortisation (EBITDA), one well-placed source said.

Exact pricing expectations, at this stage, are unclear. However, Baird tends to target deals in the upper-mid-market worth at least £150 million. In June, the US-based investment bank sold Northern Irish e-learning provider Learning Pool, which last year logged EBITDA of €5.8 million, to Marlin Equity Partners, in a transaction that valued the company at €160 million, The Times reported.

Given that KidsKonnect’s offering is sold as software-as-a-service (SaaS) and it dominates its domestic market, its enterprise value could be predicated on a multiple of its revenue as opposed to EBITDA, one source said, noting that the business has “sticky customers”.

Formed in 2019 by a merger between Flexkids, Konnect, HHB and TecSoft, KidsKonnect has more than 600 clients, which collectively cover 75% of the Netherlands’ early years market, according to press releases.

BB Capital and Vortex took a joint-majority stake in KidsKonnect in July 2019 for an undisclosed sum.

Since investing in KidsKonnect, the buyout groups have spearheaded a domestic buy-and-build strategy, hoovering up rival KidsVision last September and more recently, in April, Portabase, a software provider geared at the childminder segment. In July, KidsKonnect bought Social Schools, which builds parental-engagement software for schools.

A source familiar with the segment in which KidsKonnect operates told EIG that prospective bidders may raise questions over the “TAM [total addressable market] and growth opportunities outside of its core market”, given that the firm is “largely Dutch, at present”.

The person added: “Precedent examples of European ed techs expanding outside of their core markets are few and far between.”

Another insider added that there is “no runway in the Dutch market” as it is “basically fully penetrated… and it’s unclear whether [KidsKonnect] can truly internationalise”.

Baird could look to leverage its extensive network of US-based investors, including trade and private equity sponsors, which may be seeking a foothold in Europe’s burgeoning ed tech market, one source said.

A comparable UK-based company to KidsKonnect is Connect Childcare, which claims to count 70% of the country’s top-25 nursery chains, and more than 3,000 individual sites, as clients, according to its website.

Comparable recent deals against which the enterprise value of KidsKonnect could be benchmarked, according to one banker, include the sales of school management information system (MIS) providers ESS to Montagu (majority deal); iSAMS to private equity-backed IRIS Software Group (majority); and Arbor Education/The Key to CBPE Capital (minority).

BB Capital declined to comment. Vortex and Baird had not responded to requests for comment at the time of publication.

Date published: 24 August 2021

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