Lightyear Capital Buys Into Higher One
PE firm’s collegiate financial services investment signals interest in sector considered now to be more valuable, stable, than mortgages.
August 11, 2008
Lightyear Capital bought a minority stake in Higher One Holdings, a tech-driven financial services company for college students, making it the company’s largest shareholder.
The size of the stake in Higher One, as well as Lightyear’s investment, were not readily available. Donald Marron, chief executive and chairman of Lightyear, said that most of his firm’s investments range from the $75 million to $150 million range, and added that the stake acquired in Higher One came at the lower end of that scale, without offering a specific number.
“Higher One provides Lightyear with a strategic investment opportunity in a high-growth area of the payments processing industry,” Marron said. “Higher One represents a classic Lightyear investment: we have identified a strong, talented management team running a unique technology-focused business that is supported by long-term growth trends, including the continuing shift toward electronic payments and the use of debit cards.”
Marron said the company’s recent annual growth ranged from about 50% to 60%, that this is projected to continue into the near-term and that, similar to a previous Lightyear Capital collegiate services investment, Higher One represents a potential IPO candidate.
Lightyear, which is a private equity firm concentrating on making buyouts and growth investments in financial services companies, in 2006 exited a similar portfolio investment in Collegiate Funding Services, which helped college students finance and re-finance loans. Marron said, without disclosing specifics, that Lightyear’s exit from that investment gave it a return of more than 500% on its investment.
Founded eight years ago, Lightyear, through its affiliated funds, has managed approximately $3 billion of committed capital, according to its Web site.
Founded in the same year as Lightyear, Higher One today serves about 185 schools and 1.5 million students. Stewart Gross, a managing director with Lightyear, said that the typical two- and four-year university is representative of what is served by Higher One, but also that the company serves vocational schools. He added that, while Higher One might not have any synergies on which to capitalize with other portfolio companies, that Lightyear’s investment now allows for the company to pursue additional M&A to help bolster its continuing growth.
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