Transactional analysis

2025 was positive from a children’s day nursery transactional perspective. We saw continued consolidation, with large groups increasing their share of acquisitions, and a range of deals being agreed, from those at the very top end of the market right the way through to new entrants taking their first steps into the sector. There was also a clear movement in the number of transactions completed by independent nursery operators and first-time buyers.

73% of day nursery transactions were on a leasehold basis, dominating the marketplace, as owners continually choose to retain their freeholds on exit, and buyers sought to preserve their capital to facilitate additional acquisitions.

Some of the standout transactions for the year include the sale of Parson’s Green Nursery Schools in January, two super prime settings in South West London. They were sold to Inspired Education, which was looking to create feeders into their schools and wider education portfolio. In March, Perfect Start Day Nurseries, which comprises eight superb leasehold settings that were organically grown by the owners to create some of the most impressive nurseries in highly sought-after locations across Sussex, Surrey and Kent. The group was acquired by Kids Planet Day Nurseries, and this entry into the South of the country has been the catalyst for their expansion plans into the region.

In Scotland, we brokered the sale of Roseangle House Nursery in Dundee, Highland Fling Nursery in Portobello, and Fly High Early Learning & Childcare in Prestwick, highlighting strong demand for quality nursery settings across the country, with interest from both established operators and first-time buyers.

Wales saw continued activity and demand from buyers around the main conurbations, such as Cardiff and Swansea. They have been focused on quality settings with solid profits being delivered, and whilst corporate activity may not be on the same scale as it is in England and Scotland, we are seeing demand via smaller groups consolidating and trying to gain market share.

This volume of quality activity continued throughout the year, across all areas of the UK. Notably, we saw heightened activity in the North East and the South West, which was driven by buyers looking to expand their current offering in locations they may not have previously considered.

Investment in the sector

While private equity investment remains confined to a small proportion of overall UK nursery business ownership structures, it would be remiss not to acknowledge the growth of investment interest. For some providers, this facilitates speedier access to capital, enabling the investment in quality improvements, staff development, and digital infrastructure, helping to raise standards and, as we saw last summer, move nimbly to create new capacity to meet the demand for places that was fuelled by extended entitlements.  

Borrowing has been more stable, and the major banks have become more competitive in winning business with rates and their offerings being more attractive, which is a positive sign for all. Inflation, while having a few spikes, is getting to more manageable levels for us all.

Sector funding

September 2025 marked the full rollout of the extended 30-hour entitlement for eligible children aged nine months to school age in England. This has driven a resurgence in demand for places for children under two years of age, leading some providers to create additional capacity through space reconfigurations, the acquisition of nearby premises, and the construction of buildings within nursery grounds. Early years funding rates, as revised in April, teamed with this increased demand, have, for some, bolstered revenues and improved financial headroom for re-investment and earnings.

In Scotland, the Government distributes funding to each local authority at varying ‘sustainable rates’ due to differing demographics. These rates are reviewed annually and support the delivery of 1,140 hours of funded childcare per year for all three to five-year-olds and eligible two-year-olds. Since 2018, nurseries have benefited from 100% Non-Domestic Rates relief, providing financial support. Despite challenges around funding and staffing, private providers remain resilient, adapting session structures and fee strategies to sustain performance.