Apprenticeship business Paragon Skills has been sold by Sovereign Capital’s second fund to Sovereign Capital’s fifth fund, EducationInvestor Global can reveal.

This publication has learnt that the private equity firm decided to sell the asset from its second fund, achieving an exit for the vehicle’s LPs, while reacquiring it via its latest fund to continue supporting Paragon’s growth plan.

Paragon has been marketed off an EBITDA of around £3.5m, according to three sources close to the process.

“Sovereign has decided to keep the business despite receiving several offers, because it saw a wide array of market opportunities that can still be pursued with this asset,” a source close to the process said. “With this project in mind, the best approach was to sell Paragon from its older fund, reaping a good return for its investors, while reacquiring ownership through its fifth vehicle.”

Sovereign’s second fund, Sovereign Capital Limited Partnership II (SCLP II), is a £275 million vehicle raised in 2005. Investors in the fund include Asia and US-based LPs as well as several European investors such as Access Capital Partners, Danske Private Equity, Nordea Investment Management, Robeco Private Equity and Wilshire Associates Europe. The firm’s fifth fund, Sovereign Capital Limited Partnership V (SCLP V), was launched in 2019 with a £500 million target. Its predecessor, Sovereign Capital Limited Partnership IV (SCLP IV), closed on £395 million in 2014.

The sale of Paragon, which started last December and has been run by Grant Thornton, attracted the interest of several bidders, including US-headquartered Management & Training Corporation (MTC), which was considered the frontrunner for a while. Furthermore, at least two private equity firms showed interest in the deal and entered the race to buy the company, as reported by this publication.

Responding to a request for comment from this publication, James Dargan, director at Sovereign Capital, said: “This is a fantastic business in a high growth market.  We are delighted to be working with the management team as it further deepens its offering in the sectors it knows well and looks to replicate its success in new areas.”

Paragon generated turnover of around £9.8m in 2020, with gross profit of £4m, EBITDA of £1.2m and operating profit of £1.1m.

Founded in 1998 and based in Bournemouth, the company provides apprenticeship and training across a broad range of sectors, including healthcare, childcare, accountancy, business administration, hospitality and automotive.

Sovereign Capital fully acquired Paragon in 2008 investing via its second fund, in a deal that reportedly valued the business at around £15m.

Subsequently, Paragon expanded its operations into the Midlands with the acquisition of childcare training provider Platinum Training & Development, a company based in Dudley with branch offices in Derby and Newcastle-under-Lyme. The transaction was supported by a senior debt package provided by HSBC.

In 2015, the group went through a period of turnaround and change under the leadership of newly appointed chief executive Mark Botha and chair Heather Frankham.

Paragon is one of the several assets that have recently come to market in the apprenticeship space, an industry that has shown resilience during the pandemic, especially for businesses able to provide a strong digital offering.

The sector has become particularly attractive for private equity funds, which are still sitting on record amounts of dry powder and are searching for highly scalable assets to acquire.

Babington, another British business that provides apprenticeships and workplace training across a range of sectors, has recently come to market. The company, which is owned by RJD Partners, has been marketed off an EBITDA of around £4-5m.

Furthermore, UK-based Firebrand, which offers accelerated training courses, IT apprenticeships and certifications, appointed Grant Thornton last February to explore a sale process.

Grant Thornton did not respond to an immediate request to comment.

Date published: 4 May 2022

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