Childcare & Education

Our Childcare team has advised on every major UK day nursery portfolio transaction since 2006. We provide services across the entire early years and looked after childcare business lifecycles, from conception to exit.

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Over the past year, we have seen significant activity across the UK day nursery sector, with an increase in acquisition enquiries, nursery inspections, market appraisal requests and transactions.

Day nurseries

During 2016, the market remained incredibly strong which was largely due to the appetite of buyers, lenders and investors, teamed with an increase in owners deciding to exit. In most cases the execution of an owner’s exit strategy is principally due to their desire to pursue retirement plans. However, the buoyancy in the market has also enticed some owners to sell their businesses earlier than they had originally planned.  

Many of the opportunities which Christie & Co has been called to advise on during the year were subject to very strong interest, multiple offers and speedy completion processes. The most successful sales processes for both groups and larger single asset sales are those that are presented to the market in confidential sale campaigns, and also where the opportunity is realistically priced resulting in competitive bidding.  

Highly competitive bidding for group opportunities and single assets were noted throughout the year, culminating in multiple group transactions including the sale of: Positive Steps Day Nurseries, First Class Child Care, Bush Babies Nurseries, Yellow Brick Group, Little Unicorns - and in the largest deal of the year, the sale of Asquith Nurseries, for a reported £166m.

During 2016 out team advised on childcare and education assets with an aggregate value in excess of £1.1bn, including the valuation of the Childbase portfolio for client information and secured lending purposes, and strategic transactional and valuation advice ahead of the Asquith Day Nurseries portfolio sale to Bright Horizons Family Solutions.

The UK nursery sector continues to be highly fragmented, and we continue to see an increase in demand from national and regional nursery groups seeking to expand their businesses via acquisitions and organic developments, as well as increased enquiries from early years operators, investors and overseas buyers.

Eager buyers continue to principally seek high quality freehold or leasehold settings with a minimum of 50 places, which can demonstrate proven and established levels of EBITDA and present opportunities for further development. They also look for assets which have been subject to ongoing capital expenditure, enjoy Good or Outstanding Ofsted outcomes, and those which employ a highly qualified, well remunerated and autonomous workforce.

From a regional perspective, while there continues to be high demand across the UK, the most desirable areas for buyers continue to be the South West, the Home Counties and London. This demand is driven by the high fee levels that some settings are able to achieve across these regions.

The most highly desired assets are those which are held on unencumbered freehold titles or those which are leasehold on leases which are inside of the Landlord and Tenant Act, with rents which are either at or below market rent, and businesses which can demonstrate solid sustainable earnings.  

Buyers are sophisticated and while there is high demand for quality settings, they are continually mindful when considering the longer term potential impact and the full year effect that the living wage will have on the businesses they are contemplating acquiring, as salary expenditure continues to be the largest operational cost of any nursery business.   

The outlook for activity during 2017 continues to be very positive. With the first four days of 2017 we were delighted to announce the sale of Magic Nurseries to LPCR, France's leading private nursery chain and one of the largest premium private nursery groups in Europe. 
 
Thus far, Brexit has not had a negative impact on activity in the UK childcare market, indeed we have actually witnessed positives emerging with increased interest emerging from overseas groups and investors seeking UK platforms, in part arising due to enhanced monetary gains for overseas potential purchasers, due to the fall in the value of Stirling. 

Owners and buyers alike are increasingly thinking about the introduction of the 30 hours ‘free’ entitlement which is planned from September 2017. However, because there are so many unknown quantities and variables yet to be determined, this makes it incredibly difficult to accurately forecast the overall impact on the market and the prices that buyers may be willing to pay.

Education

As with the children’s day nursery market, demand for both private education and specialist childcare businesses has been consistently growing throughout 2016 and into 2017.  Clearly London and the South East continues to be a focal point for many companies who are looking to expand, invest and develop, however, with the specialist childcare market – including businesses such as foster care agencies, children’s homes and SEN schools – the appetite for acquisitions is very much consistent across the UK.  This is mainly driven by the variation of services that organisations want to be able to offer and also the fact that geography becomes less of a focus due to the income streams being mainly Local Authority driven rather than private. 
 
2016 saw competitive bids being secured on a variety of specialist childcare opportunities that were for sale and in many cases, offers over and above asking price were agreed.  We have seen that this high degree of demand has continued into 2017, and we expect to see further activity across the specialist sector as experienced providers look to expand and develop.

If you're a buyer or investor keen to learn more about the sector, changing and emerging trends, comparable deal evidence, USPs and the impact of potential policy introductions on business operations, or if you are contemplating the possible sale of your childcare business, please contact our specialist Childcare team.

£1.16bn

circa aggregate value of childcare and education assets advised on
 

88

schools valued in RICS 'Red Book' compliant reports for secured lending purposes



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Childcare businesses for sale

Trends in the regions

We continued to sell a varied spectrum of childcare businesses from freehold and leasehold day nurseries, children’s homes, play centers and out-of-school clubs across the regions during 2016. Activity has increased significantly during the past 12 months, and banks are not only supportive, but actively encouraging their customers to expand via acquisitions and organic developments. 

General Activity

As predicted, 2016 was an exceptionally busy year for transactions across the UK. We have seen increased demand from first time buyers looking to enter the market along with small group and regional operators as they look to consolidate by organic growth, and acquiring competitors and larger transactions from corporate operators. Demand has been high for the larger portfolios which we have brought to the market, with interest from UK operators, investors, high net worth individuals and overseas operators looking to create a platform in the UK. Hot off the press in the first week of 2017, LPCR (Le Petit Chaperon Rouge) one of Frances leading childcare providers, has just made their first major acquisition in the UK after acquiring Magic Nurseries, a portfolio of 16 childcare settings.

South

Again the picture is much the same in the South with small group operators looking to expand as access to funding for experienced operators in particular has become easier. In the Midlands and Anglia regions the market is also buoyant with first time buyers taking on the challenge of owning their first run settings aided by the banks appetite to fund newcomers with prior experiences gained from other business sectors. 

Activity within the South West region has grown steadily over 2016. We are seeing appetite for both small and large settings from a range of buyers. Regionally we are seeing an increase in demand for leasehold businesses and keen interest from investors exploring options away from the more competitive market in the South East of England.
 

London

In London most of the interest continues to be fuelled via local operators striving  to increase their market share. Demand from buyers is far more pronounced in London, in comparison to other parts of the UK, this being largely due to limited availability, occupancy levels and the fees that can be commanded. As new opportunities are introduced to the market, offers are often accepted and deals agreed within a matter of days, for the most sought after and desirable assets.

North

In the North we have witnessed increase in demand from first time buyers to regional and corporate operators, largely driven by the lack of supply as well as interest from buyers from across the country. Across the North West we have continued to see very high demand for high quality settings on both a leasehold and freehold basis continuing to drive the market. 

Scotland

Over the last 18 months the market in Scotland has improved significantly with competitive closing dates and increased transactional activity further boosted by the return of corporate activity.

Wales

The market within Wales is also becoming more active with inquisitive buyers and investors from England increasing their interest .The Welsh Government has announced £10m to pilot a 30-hours free childcare offer from September 2017 which if implemented would bring funded childcare more in line with provision already available within the private & voluntary sector in England.

What we can offer you

Our Regional Childcare & Education team of 45 includes 30 Chartered Surveyors, along with specialist Business Agents and Consultants located across the UK – the biggest sector specialist team of any firm.  All of our chartered surveyors are RICS registered valuers with experience in the Childcare & Education sector. We also have a specialist rating team with a wealth of experience nationwide. 

As well as providing valuation advice, our team has experience in business rates, consultancy, development, and landlord and tenant including: rent reviews, lease renewals, expert witness and dispute resolution.  Within our team we have a wealth of knowledge and experience which allows us to provide sound and reasoned advice. 

Our Services

With experience across the entire market, from major players to independent operators, we can offer solutions tailored specifically to our clients' needs.

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