2022 was a ‘golden year’ for nursery mergers and acquisitions, finds report

The childcare broker reported completing in excess of ‘100 childcare transactions’ last year, which ranged from single-site providers to large nursery groups sold to major UK childcare providers, such as Kids Planet  and All About Children.

Paul Miller, Redwoods Dowling Kerr’s (RDK) chief executive, said in the Winter 2023 Childcare Report, ‘We referred to [2022] as a golden window of opportunity and this proved to be the case.'

He added, ‘In January last year we forecast the market would benefit from increased levels of deal making activity and high levels of consolidation. We also predicted acquisitions would take place in all parts of the UK and paid multiples would remain high. All these forecasts have come true during the year, with no current signs of macro activity slowing down, despite the economic turmoil taking place.’

Referring to 2022 as a ‘roller coaster year’ beset with challenges arising from the impact of Covid; dealing with post Brexit; conflict in Ukraine and a summer of ‘unprecedented political chaos’, Miller said the outlook for 2023 ‘remains strong’.

He added, ‘We predict demand during 2023 will remain strong as national operators continue to acquire settings which satisfy their strategic goals and criteria. Additionally, we believe new entrants will continue to purchase, as our new buyer registration data in Quarter 3 and Quarter 4 is 27 per cent higher than 2021 with our internal key performance indicators showing an increase in enquiries, viewings and offers agreed.’

Taxation is cited in the report as a ‘major concern’, with the recent budget announcing ‘sweeping tax increases’ to businesses and business owners. Rising interest rates and costs are also likely to put markets under pressure, the commentary states.

Andrew Steen, RDK’s sales and marketing director, said in the report, ‘We believe we have reached a tipping point and that the supply of childcare businesses for sale will increase, although premium opportunities will still not meet the demand from buyers.’

Looking ahead into 2023, he said, ‘We are confident that childcare groups with high occupancy levels are set to achieve strong multiples. Premium prices are expected to create outstanding sales opportunities.

RDK expects further consolidation to take place as national operators and regional players increase their market activity.’

The report also offers insight into market opportunities and detailed guidance on how to sell a childcare business.

The full report is available here