London: Public sector and BPO specialist Capita last week forged a ground-breaking joint venture with the UK Government's Cabinet Office.
Capita was chosen after a competitive procurement process to form a joint venture company (JV) with the Cabinet Office to deliver and commercialise the Government's portfolio of best management practice training tools and services and create a growth business in which both parties will share returns.
The Government has developed a proprietary portfolio of leading and globally renowned best management practice training tools, including PRINCE2, an established and proven project management methodology, and ITIL, the most widely accepted approach to IT service management in the world. The products are widely used in the public sector and increasingly used across private sector organisations and internationally. Revenues are currently generated through royalties from training materials and fees from an ecosystem of accredited training, examination and certification organisations.
Capita and the Cabinet Office will hold 51% and 49% of the JV company respectively; the partnership will own the intellectual property (IP) of this portfolio of products and assume the management and support of the ecosystem of accredited service organisations. Capita was selected having demonstrated a strong track record of successfully acquiring, developing and growing small to medium sized organisations and transforming services. It will draw on this expertise to create a new business capable of fully developing, commercialising and growing the portfolio of best practice training tools and achieving greater market penetration both in the UK and internationally.
Capita is paying the Cabinet Office an upfront cash payment of £10m and three deferred cash payments of £9.4m over the first three years for a 51% shareholding in the joint venture, which will own in perpetuity the IP of the portfolio of products. It is anticipated that the joint venture will triple the current revenues of approximately £40m per annum by year 10, through further commercialising and developing the product portfolio in existing and new markets, and generate healthy margins.
Paul Pindar, chief executive of Capita plc, said, "We are thrilled to be selected as a partner in this innovative business model that uniquely combines assets and capabilities from the Government, Capita, current employees and the ecosystem of the existing and new SME service providers. The commercial, technical and innovation skills that we bring to the JV will help to create a thriving business capable of delivering real value to all parties and releasing a secure and growing income to the Government.
"We have detailed plans in place to stimulate and support the strong growth of the ecosystem and create a successful and sustainable JV. We will develop the current portfolio, including digitising services and introducing experiential learning methods such as gaming and simulation, and broaden both the products and the markets in which they are sold across the UK and worldwide.
"The JV will create a strong and growing market for learning, accreditation and examination organisations, with the majority being SMEs, and provide an excellent platform for helping to improve skills and employability. Additionally, the commercial success of the JV will not only be shared by the joint shareholders but also the employees, who will share a performance bonus pot of 5% of the JV's pre-tax profits."
Francis Maude, Minister for the Cabinet Office said: "The state is littered with potential businesses which could be bringing in revenue, creating jobs and driving economic growth. We are committed to getting Britain ahead in the global race, which is why we want to exploit these hidden gems and use the profits to protect our frontline public services.
"It's a great endorsement of the Civil Service that major companies use PRINCE2 and ITIL but business expertise and investment is needed to develop them commercially. This partnership shows that business is ready to work with us in innovative ways to make substantial savings to taxpayers and paves the way for many similar deals in future."
The existing products and services will maintain their current brands and the JV will be branded to support both the current and growing portfolio of products and services. The JV will assume ownership and management of the current portfolio from 1 July 2013 and full operational delivery from 1 January 2014.