Arlington Capital Partners made a leap into the for-profit education sector, committing $50 million to buy a California post-secondary school and to make further acquisitions.
Arlington, based in Washington, is a private equity company managing a $450 million corporate-buyout fund. Its strategy has been to create "platform companies" with a team of operating executives, providing the capital necessary to build the platform into a bigger business, then to sell it in three to five years. It has committed between $20 million and $75 million of its money, plus borrowings, to each of a number of sectors. They include radio, television, federal information technology and environmental consulting.
For its education platform, Arlington created BrightStar Education Group Inc., through which it bought Institute of Technology, a mid-size school in northern and central California. Based in Clovis, Calif., the state-accredited school provides bachelor's degrees and certificates of diploma in business, technology, culinary and health care fields. The school has four campuses and 1,700 students.
Jeffrey H. Freed, an Arlington partner, said the acquisition used only a portion of the $50 million Arlington has committed. Along with anticipated borrowings, he said, BrightStar "has considerable powder left to do acquisitions."
The for-profit, post-secondary education sector is characterized by a few large players -- The Washington Post Co.'s Kaplan Inc. is among the largest, and is a BrightStar competitor -- but is largely populated by mid-size regional players. The industry is ripe for consolidation, Freed said, adding that BrightStar has a letter of intent to buy another school in the western United States and anticipates more deals in the next year.
Freed said Arlington is still looking for a chief executive for BrightStar but has formed a board. Its chairman is Robert S. Christie, former chief executive of Thompson Learning. Tony Coelho, former U.S. representative from California, and John Danielson, a former chief of staff to U.S. Department of Education Secretary Roderick R. Paige, will be board members.