Exponent Private Equity has flipped TSL Education to Charterhouse Capital Partners (not to be confused with the US firm the Charterhouse Group, who also invest in education). Terms were not disclosed and TSL’s management team, led by Bernard Grey, is to remain, although for how long is another question.

Grey claimed that EPE had internal reasons for selling and were doing so with ‘a heavy heart’. If this were really the case we suspect that they would have stayed or at least announced the terms of the deal. Of the £10m Grey claims EPE have invested in TSL, at least £5m was for the relaunced TES magazine, which while looking less dowdy reads like a poor imitation of Grazia. We suspect that staff at TSL, already demoralised by EPE’s cuts, will find another round of belt tightening just around the corner. While Rupert Murdoch has long been demonised as a malign influence on the British media industry, we suspect TSL employees and others in the UK media are realising he might have been a hard taskmaster but a preferable boss to EPE, Charterhouse, KKR, Apax or Permina because he understands both journalism and the business side of the media.

Flipping a business profitably after just 18 months is not unheard of in the world of private equity (the PE buyers of Double Click achieved about £1.8bn two years after buying the company for £0.5bn) although in the education sector it is uncommon. EPE’s return on their £235m, plus £10m ‘invested’ can only be speculated on.

So what now for TSL under Charterhouse? They aren’t known as a media investor, although they claim to invest in ‘opportunities where we believe we have a special insight’. Odd, as from what we can find out none of their team has any significant media or education experience. Perhaps the real driver is the €4bn sitting in the Charterhouse Capital Partners VIII fund that needs investing? Or there may be unforeseen investment synergies with their other investments, the largest of which is SAGA, the over 50’s holiday and insurance company. Given the rapidly aging UK teaching population this may be an ideal match that will see lots of advertising for 50+ holidays and car insurance in the TES magazine!

Whatever their motivation it’s clear that Charterhouse will sweat TSL very hard – their recent fund performance (since 1994) from 19 realised investments has given a gross internal rate of return (IIR) of 56%. Last October we said that the pressure was growing on TSL to sort out its online strategy as the key to rebuilding advertising revenues and the need to improve the quality of content before EPE’s ‘journalism lite’ strategy alienated the core readership. The same applies to Charterhouse, but can they achieve this with the same management team; we suspect not?

www.charterhouse.co.uk

www.exponentpe.com