Private fairness sale of €6bn fee-paying colleges group Cognita on brink of collapse | USAEMALL.com

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A private equity deal for €6bn UK private school operator Cognita is on the brink of collapse, with a stake sale to the final remaining bidders Blackstone and CVC now unlikely to proceed.

European investment group Jacobs Capital has been seeking to offload a substantial stake in the group, which operates more than 100 fee-paying schools across 20 countries.

But the attempted stake sale, which would give the buyer joint control over Cognita alongside Jacobs, was now at risk of falling apart, people with knowledge of the matter told the Financial Times.

Cognita’s assets include 38 schools in the UK, where the Labour government’s introduction of a 20 per cent tax on private school fees this year has led to uncertainty about the size of the market and threatened the future of some institutions.

The faltering Cognita sales process is Jacobs’ latest attempt to sell down some of its holding, after it had marketed a minority stake in the business last year. Banks were first invited to pitch for work on the current sale process before the UK started applying VAT to school fees in January, according to people familiar with the matter.

A mismatch between offers and Jacobs’s desired price, alongside the UK tax changes, has made striking a deal difficult, one of the people said.

Cognita is one of a number of large private equity-owned assets that have become more difficult to sell because of their size, amid a broader slowdown in takeovers and new listings.

While such companies would traditionally have been floated on the public capital markets, the market for initial public offerings in Europe has yet to rebound as it has in the US. Uncertainty over the implications of the UK tax changes would create an additional challenge for marketing Cognita to potential IPO investors.

Jacobs Holding, which in June became Jacobs Capital through a merger with Telemos Capital, acquired Cognita in 2018 at an enterprise value of £2bn from Bregal and US private equity group KKR, which had invested in 2013.

Jacobs is the majority owner, while investors BDT & MSD, and Sofina have minority stakes.

Another private equity group, EQT, last year opted to bring in a new outside investor for its $14.5bn schools group Nord Anglia after previously exploring the possibility of a full sale. Investors find private schools an attractive source of income as they offer relatively reliable revenues, even in times of economic strife, as wealthy parents are still willing to pay significant fees.

Cognita’s schools span the UAE, US, Brazil, Mexico and Thailand. Locations include York Prep School in New York City and, in the UK, Brighton College Prep in Kensington, whose website advertises fees of up to £36,700 per year.

Cognita was co-founded in 2004 by Sir Chris Woodhead, the former head of Ofsted, England’s education regulator.

Jacobs, Cognita, Blackstone and CVC declined to comment.