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The Back-To-School SBIC Special

September 19th, 2011

Millions of students across the U.S. have tapped the federal government to help pay for education. Now Renovus Capital is doing the same.

The firm, which recently received its license as a Small Business Investment Company, is taking advantage of the low-cost money available from the Small Business Administration. Having already raised around $33 million from a group of high net worth individuals, the team now has around $100 million at its disposal for deals focused on the education sector.

The firm’s founders, Bradley Whitman, Atif Gilani and Jesse Serventi, are no strangers to the education business, having worked together at Leeds Equity Partners, which also inhabits the space. While at Leeds, the Renovus partners worked on deals including the EduK Group, a for-profit college in Puerto Rico; Campus Management Corp., a Florida-based provider of software systems to colleges for administration, grading and class schedules; and Ex Libris Group, a software business focused on university libraries.

Whitman said it is unlikely Renovus would end up bumping up against Leeds for deals, given that their former firm focuses on businesses higher up the food chain. Renovus is targeting growth plays and control positions where it can invest between $5 million to $15 million per deal in businesses with less than $10 million in Ebitda.

The firm has already got some deals in the pipeline, including a letter of intent for a profit-college focused on healthcare education.

“It’s a good area given macro trends, and the need for more nurses and medical professionals,” said Whitman. “The school has a model where it’s more affordable to go to than most for-profit colleges.”

Renovus has a little more space left in its fund for private investors, with a target of $50 million and a hard-cap of $75 million, which based on the 2-1 SBA matching funds would give them about $225 million.

Given its parameters as an SBIC, the firm’s focus will be exclusively in the U.S. Whitman said it will look nationally, but prefers to invest in the Northeast, where partners can travel from their home base in Philadelphia to visit portfolio companies. But primarily the firm is looking to invest in parts of the country with a growing population and regulatory bodies that are open to private companies in the education space.

“Florida is a good example,” said Whitman. “The government there is very supportive of for-profit colleges. You’ll see more of these opportunities in the sun belt.”

SOURCE: The Wall Street Journal