The day nursery market is hotting up. Are you ready for it?Sponsored
Leah Turner, co-founder of Owen Froebel
Friday, September 30, 2022
SPONSORED CONTENT Specialist broker Owen Froebel provides insights into the current market and points to key issues that sellers need to consider.
There is a lot of conversation at the moment about how busy the day nursery acquisition market is, but unless someone is looking to sell right now, what does this actually mean to a nursery owner and why is the market heating up at all?
Early years learning has changed at a rapid rate over the past few years and with that there has been an increase in buyers looking to invest into the sector. These buyers are nowactively competing with the more established nursery groups – who themselves are looking to acquire settings that enhance and reflect their existing portfolio. This consolidation of the market is driving values up and allowing sellers to get higher sale values than ever before.
Despite the speed of change, we are a long way away from a fully consolidated market, and this is driving the private equity backed chains working on a ‘buy and build’ strategy. These include many well-known names, such as Kids Planet and Busy Bees, as well as newer names such as Happy Days Nurseries who have just secured investment to grow from 18 to 50 settings in the next year.
Understanding the market and how values are changing is more important than ever in a competitive market, as no seller wants to be unknowingly undersold, and no buyer caught up in a bidding war when they aren’t convinced that the inflated price truly reflects the market.
Whether you are looking to sell in the next six months, or the next six years, understanding the market and how that relates to your own business is an absolute must. Preparation is key, to ensure that when the time is right for you, you are able to secure not only the right price, but the right buyer as well.
So much of this is tied up in understanding your own business from the day-to-day processes, to how to present a set of accounts in such a way that a buyer will understand them. Are there aspects of how you fill the sessions that are resulting in lower occupancy? Is your accountant splitting out personal costs that may be construed as an ongoing business cost to a lender?
A buyer, their lender and their solicitor will look at every part of the business when the time comes, so familiarising yourself in advance to the parts that may result in a price reduction will allow you to maximise value and be best prepared when the questions are asked. The easier a set of accounts are to read, the stronger the value!
Also consider which external factors you will have to deal with when selling. Does the current lease offer a security of tenure to the buyer and their lender and should this be addressed by you, or by them? Are your service contracts and staff contracts in the name of the Limited Company, or in your sole name? Taking time to build towards exit allows for a much smoother and straightforward transfer further down the line.
Then there is the catch 22 of the value itself. You don’t know if you can afford to sell until you know what the business is worth, and you won’t know what it is worth until it’s time to sell. Taking advantage of free valuations and ongoing support sometimes years before sale allows you to work towards the ‘magic number’ as well as pension plan with a realistic figure in mind.
So, whether you are already exploring the market, or you are currently watching from the sidelines as you are not quite there yet, as with all things, preparation is key.
Offering free day nursery valuations, followed by a comprehensive report Owen Froebel is able to help you understand the day nursery acquisition market and how it relates to you and your setting.
Find out more here