Innervation Capital Partners

Innervation Capital Partners (“Innervation”) is a sector-focused, theme-driven investor. Proprietary deal sourcing is our primary source of sustainable competitive advantage, driving superior returns. In search of value, we focus on fragmented industries providing essential services. We exploit dislocations in pricing based on size and complexity. To execute this strategy we provide more than just capital. We work with our operating partners and proven entrepreneurs to craft a plan which realises the full potential of the business over the long term.

Innervation is pleased to have agreed June 1, 2021 the sale to Oakley Capital IV (“Fund IV”) of ICP Education Holding Limited (“ICP Education” or the “Group”), a leading independent group of UK nurseries founded by Tracey Storey & Innervation to exploit the opportunity to “buy & build” in a highly fragmented market.

ICP Education is one of the largest nursery operators in the UK, serving nearly 6,000 children at 44 nurseries across England, predominantly in London and the South East. The Group is one of the highest quality large nursery operators in England, with a third of nurseries rated Ofsted Outstanding and 98% rated Outstanding or Good. In addition, last year ICP was ranked as the 14th Best Place to Work in the UK by Glassdoor, across all categories.

ICP Education has achieved a strong track record of growth since its foundation in 2016. The UK nursery sector is a £6.7 billion market serving an estimated 850,000 children across 15,000 nurseries, most of which continue to be owned and operated on a single-site basis. The market has grown steadily at 4.5% CAGR between 2010-2019 driven by rising female labour market participation and an increasing awareness of the importance of early years education.

Innervation’s principal focus remains in the education sector. Tracey Storey left ICP Education as part of the sale to pursue a “buy & build” with Innervation in Special Educational Needs (“SEN”) schools.

Innervation announced on September 7 2021, the formal launch of Melrose Education Investments (“Melrose”) with £17.5mm of committed capital from a group of investors who previously coinvested with the Firm at ICP Education. Tracey Storey is Executive Chair of Melrose with Mike Burton as Chief Operating Officer, following completion of the acquisition of Orchard Education by Melrose.

Orchard, which supports learners with a diverse background of need, is an ‘Independent Special School’ with expertise in supporting learners with Autism, ADHD or more general Social, Emotional and Mental Health Need (SEMH). Orchard’s vision is to create an engaging and broad curriculum which raises aspirations, inspires positive behaviour, promoting a change to life-long learning.

Innervation’s strategy is to create one of the UK’s leading independent SEN providers in this fragmented market which serves 430,000 children with Education & Health Care Plans (“EHCP”). This exceeds the number of available places by almost three to one.

The number of EHCPs is also still growing, leading to an increase in high needs funding of 7% per annum & capacity shortages for this essential service. Growth reflects increasing awareness of mental health issues & recognition that mainstream schools are unable or unwilling to meet the complex needs of children diagnosed with mental health challenges.

The value of the total public and private independent sector supply of special schools and colleges is estimated at £4.29 billion (LaingBuisson Healthcare Market Review 2019/20) in England alone. The independent sector accounts for circa £1.2 billion of this. The total number of schools an colleges was reported to be 1,696 with a capacity for 167,001 pupils, with 153,750 pupil / students (i.e. occupancy of c.92%). The majority of students, approximately 83%, were attending schools provided by the public sector. In the independent market, there are 640 schools and colleges with 21,817 pupils.

Melrose has completed another two acquisitions in London & the South East. Most recently, in March 2022, Melrose completed the acquisition of TLC in order to serve more Local Authorities & establish a platform for organic growth in Croydon, Greenwich, Bexley, Bromley, Kent, Lewisham & Wandsworth.

Melrose plans to create new places in schools and primary settings from year 5 to 16. Melrose will improve existing provision to create modern, fit-for-purpose spaces suited to a wider range of pupil needs, including funding the cost of creating a whole new special school in areas with unmet needs to ensure pupils with SEN receive the specialist support they need to get an excellent education.

Innervation also owns a controlling stake in Eden Training Solutions (“Eden”). Eden is predominately focused on serving the Early Years & Education Sectors, with almost 76% of 1,000 LTM Learner Starts, studying at entry Level 2 (5 GCSEs) to Level 5, which is a degree level Higher Apprenticeship, in either Childcare or Education.

Eden is the preferred apprenticeship training provider to ICP Education & provides a comprehensive offer through the Digital Apprenticeship Service of 8 Apprenticeships & 8 Advanced Learner Loans, addressing every training need & skills gap in the Early Years Setting, which employs over 250,000 staff nationwide.

Innervation has the capacity to invest equity from £1 million to £20 million and has the risk appetite & patience to scale essential services platforms from start-up to £500mm Enterprise Value, providing both capital and operating expertise, over a 5-10 year holding period.

 

“We buy complexity & sell simplicity”

 

 

Central London Investment Office

Michelin House
81 Fulham Road
Chelsea
London
SW3 6RD

Jeremy Greenhalgh, Chief Investment Officer

Edward David, Managing Partner

+44 203 826 0127

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