Shore Capital to make 7x on Stepping Stones sale

  • Colorado company commands 14x to 15x multiple of Ebitda
  • Shore injected ~$10mln in Stepping Stones in 2014
  • Post expected to make ~6.5x on sale of rival Invo

Shore Capital Partners‘ sale of Stepping Stones Group produced an about 7x return for the Chicago PE shop, Buyouts has learned.

The buyer of the provider of school-based autism-treatment services was Five Arrows Capital Partners, the newly launched North American corporate private equity business of Rothschild Merchant Banking. Shore Capital will retain a minority investment, an announcement said.

Financial terms weren’t disclosed, but the pricetag equated to an about 14x to 15x multiple, based on the target’s approximately $9 million in anticipated Ebitda for the 12 month period ended June 30, 2018, a source familiar with the matter said. Stepping Stones projects about $75 million in revenue over the corresponding period, the source added.

Cain Brothers advised the sellers on its sales process, which encompassed both sponsors and existing PE-backed platforms, sources said. The sale to Five Arrows Capital closed in December.

Shore’s investment in Lafayette, Colorado, Stepping Stones dates to May 2014, when the firm injected about $10 million of equity in the platform, one of the sources said. The company subsequently closed two add-on acquisitions.

Stepping Stones, with about 900 clinicians, provides behavioral-health-services to children with special needs and autism. The provider’s services include speech language pathology and occupational therapy to more than 300 school districts in more than 20 states.

Sources likened Stepping Stones to Invo Healthcare Associates, which in 2017 gained its own pair of new backers.

Wicks Group of Cos in January 2017 bought a majority stake in Invo from Post Capital Partners, a deal that was expected to produce an about 6.5x return for Post, Buyouts previously reported. Invo was also advised by Cain Brothers.

Invo scored another investment in May, when Jordan Co injected an undisclosed sum in the Jamison, Pennsylvania, provider.

In other activity, just a couple weeks ago FFL Partners emerged as the victorious bidder for Autism Learning Partners. The highly anticipated auction commanded a more than $270 million valuation, representing the vertical’s largest-ever sponsor transaction, Buyouts previously reported.

The ALP sale marked an exit for shareholders Jefferson River Capital, the family office of Blackstone President and COO Tony James, Scopia Capital Management and Great Point Partners.

Shore Capital, for its part, backs two other autism-treatment providers. The firm in June 2016 invested in Behavioral Innovations, a Dallas, Texas provider of autism services focused on applied behavior analysis therapy. The lower-middle-market firm also backs Florida Autism Center, another provider of center-based ABS treatment services.

Sponsors continue to flock to autism treatment, buoyed by the fragmented vertical’s runway for growth and favorable underlying drivers such as increasing awareness of the problem.

Action Item: Check out the rest of Shore’s portfolio:

Photo courtesy of radachynskyi/iStock/Getty Images

Update: This story was updated to include a return figure and additional detail.