Use case - 0 - D'Ornano + Co

Objective

Exit

Investment stage

Buyout

New Business model

Online Education

Case Study

D’ORNANO + CO. PERFORMED HYBRID GROWTH DILIGENCE FOR A LEADING FRENCH TRAINING PLATFORM IN THE CONTEXT OF ITS ACQUISITION BY A SPONSOR-BACKED INCUMBENT WITHIN THE EDUCATION SECTOR

The company wanted to better understand its potential valuation and market premium to weigh future financing options, including a possible sale. The company had developed a platform which provides training classes for employees, students and job seekers indented to find new career opportunities. While the company had established itself as a reputable source for career development, the Management team wanted to explore avenues to pursue the company’s stellar growth.

Challenge

One such scenario involved a possible sale to an educational partner. However, while the business was healthy, the broad range of its programs, the profiles of people it served, and regulatory hurdles created a complex business model. Each of these sources offered very different unit economics and potential for sustainable growth. Traditional due diligence is backward-looking and, for High-growth and Disruptive companies, does not provide comfort on a company’s ability to deliver sustainable growth and create value. Also, because traditional due diligence takes a broader industry approach rather than a more precise business model approach, it can only generate a surface-level view of a company’s financial health with a limited picture of an asset’s strengths and weaknesses to consider in the investment process.

Solution

The Company retained D’Ornano + Co. to apply its Hybrid Growth Diligence for Exit product for its ability to secure key financial aggregates, and highlight the key strengths of an asset to help investors quickly capture its potential value creation levers. Going beyond classic due diligence, the firm’s HGD methodology layers Financial, Legal and ESG diligence on top of preliminary business model analysis and incorporates operational data mirroring the company’s economics in the assessment performed. The result is an in-depth analysis to accelerate the sales process of a high-growth + disruptive asset.

Mission outcome & key client impact

By using the Hybrid Growth Diligence approach, we showcased the intrinsic value levers and the resilience of the company’s business model by showcasing:

Its market leading position in highlighting its historical ability to grow in an environment where changes in regulation have resulted in greater price transparency, leading to an increased competition and price pressure;
The profitability of the courses created, by ensuring that development costs can adequately be covered with a high level of interest in the course by students;
The revenue dependency to courses requiring updates over time, as it has an impact at profitability level;
Its capacity to maintain constant overhead costs and continue to generate a significant EBITDA margin;
Its capacity to mitigate long payment terms of some customers, to limit their impact on working capital and cash-flow generation.

In validating the company’s business model strengths, its customer traction and cost structure efficiency, we helped the Management team in demonstrating strong growth opportunities. The D’Ornano + Co. team also helped the company in refining its valuation working closely with its adviser.

New Business Model

+ Vertical

Online Education companies are engaged in the production of courses where students and instructors interact using virtual method. Courses can be delivered synchronously or asynchronously. D’Ornano + Co. has historically conducted multiple Online Education assignments for global investors.