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16 October 2017 | Childcare & Education

The day nursery market in the Midlands

​The market for day nurseries within the Midlands started off a little slower this year compared with activity levels in 2016. With the triggering of Article 50 looming and many changes such as to business rates and National Living Wage ahead, potential buyers and vendors across all sectors were certainly more hesitant. The shock announcement of the General Election only fuelled this sentiment.

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After the election results, the market began to gear up again and made up for the lull at the beginning of the year evidenced by our instruction to market many new settings across both the East and West Midlands. Our completion rate was also up, having since completed on various deals displaying the diversity of buyers in the market, ranging from smaller independent leasehold nurseries in the rural parts of Worcestershire and Lincolnshire, to large nursery group deals sold in Leicestershire and Staffordshire, such as the confidential sale of 3 large freehold nurseries which were sold to an existing operator off an asking price of £3.65m which took just 3 months to complete.

Both freehold and leasehold tenures are in demand although there is a common misconception that freehold is the preferred option for a buyer. With the 30 hours funding implemented in September, many buyers would like to secure a setting before the end of 2017 in order to take advantage of the new scheme and raise occupancy levels, hence the increase in activity. This is why, if considering retirement or a move out of the industry, now is a good time to consider selling a nursery business as demand is currently very strong.

As we head into the winter period we are seeing demand particularly from first time buyers in the sector, and vendors seem to be acting on this by exploring the option of selling with strong profits being displayed across the region for the last trading year. Values are beginning to edge upwards as demand is outstripping supply, which means we are very keen to speak to day nursery operators wanting to know the value of their business and investigate a possible exit strategy now or in the future.
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