The broker’s Childcare & Education Mid-Year Review found that in the year to date, there was a 50 per cent increase in childcare businesses sold in 2022, compared with 2021, with a rise of similar proportions in new instructions (up by 51 per cent.)
Deals have included the sale of nursery groups, as well as single-site operators, with 99.5 per cent achieving the asking price, an increase on the previous year.
They include the Cheshire Day Nursery group of four nurseries and one kindergarten, based in freehold and leasehold properties in the North West of England.
Founded in 2000 by sisters Julie Mannering and Brenda Burling, the nurseries cater for up to 464 children and a growing annual fee income of over £3 million. Following a confidential sales process, the group sold to Bright Stars.
Courteney Donaldson, managing director, childcare and education, said in the report’s introduction, ‘During the first six months of the year, we saw unprecedented levels of market activity, including a 51 per cent surge in owners deciding to sell their businesses, a proportion of whom chose to sell to take advantage of the stellar prices that the best businesses have continued to achieve.
‘The emotional drain of having traded through a global pandemic, amid turbulence, challenges and uncertainty, has also resulted in a desire to sell.
‘For some, their decisions have been influenced by inflation rates, economic uncertainty, and nervousness associated to the potential impact for earnings erosion due to increased operational costs, alongside nervousness of potential diminutions in value and a wider perception of potential risk associated with the uncertainty and post pandemic financial fall-out.’
The report covers day nurseries, specialist education and looked after children, and independent education.
Activity in the day nursery market
Christie & Co said it is seeing ‘a highly competitive market with first-time buyers competing head on with experienced buyers for high-quality settings with recovered occupancy, stabilised earnings, and established staff teams with few vacancies.’
Real estate investors remain eager to invest in the sector, it said, with ‘continued appetite from existing operators keen to grow their portfolios’, and a rise in smaller nursery groups of one to four settings whose businesses have fully recovered to pre-pandemic levels that are ‘keen to expand.’
Investors are also interested in growing new businesses 'via buy and build strategies. This is fuelled by the dynamics of the sector and the consolidation opportunities available.’
While activity remains ‘buoyant’, the report notes that buyers are less interested in properties that are brownfield nursery development sites, those that are vacant possession, or that need ‘extensive refurbishment’, due to the cost of building materials ,material and trade labour shortages, and supply and logistic problems.
Nick Brown, director and head of brokerage, childcare and education, said, ‘The appetite to acquire high-quality settings - from single assets through to larger groups - has never been greater. The combination of a slightly limited supply, consolidation plans, a number of new entrants to the market, and the increased profile of the sector has seen us rise the bar on prices being achieved for sellers.’
- The Childcare & Education: 2022 Mid-Year Review report is available here
