Nursery Management: Buying And Selling – Survive, adapt and flourish


After a pandemic-led downturn last year, the investment outlook for the childcare market is rebounding and optimism is high once again. Meredith Jones Russell reports

Resilient is the best word to describe the early years sector,’ says Courteney Donaldson, managing director of childcare and education at Christie & Co.

‘It goes through so many issues but always bounces back, and the pandemic has been no exception.’

With huge, unprecedented pressure over the last year and a half, early years operators could be forgiven for taking some time to relax, reassess and regroup. But there has been very little lull in market activity in recent months, as expansions and acquisitions continue apace, and the market looks on course to return to pre-Covid levels.

Andrew K Steen, sales and marketing director at Redwoods Dowling Kerr, says, ‘We are now back to pre-Covid levels, and in the past few months, transaction levels have actually been outperforming pre-Covid.’

However, consultancy Cairneagle Associates LLP estimates the market in 2021 is worth £6.4 billion, down on £6.7 billion in 2019. Cairneagle partner Arun Kanwar explains, ‘In a stable market, you should see an increase of 3 to 4 per cent per annum, even if enrolment isn’t growing. Inflation means the market should be growing every year on a nominal basis. But 2020 was a disaster. In 2021, the market is still down, but the second half of the year has been much better and we think the market will continue to recover.’


While 2020 started well, when national lockdown was announced on 20 March, everything was put on hold.

‘I think we had 80-odd transactions in the pipeline when we went into lockdown, but obviously the moment lockdown was announced, whether our buyers were operators themselves or private-equity buyers, they all began looking inwards and focusing on their own businesses,’ explains Donaldson. ‘Everyone was really in business survival mode.’

With nursery viewings cancelled, the market stalled for several weeks. However, as restrictions began to lift, the appetite for buying returned with a vengeance.

‘Just after Easter, around April or May, buyers started returning,’ Donaldson adds. ‘In the end, last year was really good as it progressed, with completions and new instructions, and this year even more so.’

‘It is a hot market right now and prices are high,’ Kanwar says. ‘Financial performance may not be back to where it was, but demand for acquisitions is incredibly high.’


Several significant deals have been done in recent months, such as Oakley Capital’s investment in ICP Education in a deal worth £176 million, Kids Planet buying the ten-setting nursery group Poppy and Jack’s, and Family First acquiring eight new nurseries.

‘These are not investments for a short-term market, they’re a long-term play,’ says Nick Brown, regional director and head of brokerage for childcare at Christie & Co. ‘I think those players are slightly concerned that if they don’t step up and buy some of this stuff, they’re going to lose out.’

A sector poll carried out by Christie & Co found that 52 per cent of nursery owners were interested in buying nursery businesses, while 22 per cent said they were looking to sell.

‘At the moment, stock is pretty limited,’ admits Brown. ‘But if it’s high quality, we’re not short of buyers.’

Supply and demand have been huge factors in the sector’s recovery, with a drop in the number of settings being put on the market resulting in those which are available being snapped up quickly, and for high prices.

‘Just as we are seeing with food supplies and HGV drivers, fewer opportunities have come into the market than usual,’ says Donaldson. ‘Owners might want to sell, but they are often struggling with staffing and other challenges. When you’re selling a business, you need to have a degree of bandwidth to keep one running too. And many owners haven’t had that, because they are still firefighting on a daily basis.

‘The buyer pool has massively increased because people want to get into the sector or grow their expanding businesses, so when quality nurseries do come onto the market, we’re seeing significant levels of interest.’


Corporate insolvencies in England and Wales dropped to their lowest levels since 1989 at the beginning of this year, and while some existing providers might be spurred on to new purchases thanks to money saved on bills, travel, furlough or business rates relief, there has been a noticeable surge in new entrants to the sector as some companies that have benefited financially from the pandemic look to invest, and the profile of childcare has been particularly enhanced.

‘Sectors people find investable are extra hot at the moment, and nurseries are well-proven investment pieces’ says Kanwar.

Donaldson adds, ‘People appreciate childcare in a different way now. We’ve had parents working from home while juggling infants on their knee. Lots of them realised that if they found it hard to look after their own children, they really took their hats off to nursery workers trying to look after other people’s.

‘Meanwhile, so many world leaders and chancellors have said high-quality childcare is fundamental to getting economies moving in the right direction again, and that has fuelled buyer demand.’


Not everyone is in a position to expand. Plenty of providers have suffered so badly from the pandemic, it has led them to consider leaving the sector.

Steen says many nursery owners have had enough, but believes the pandemic has simply acted as a catalyst for some who were on the brink of selling up anyway.

‘Pre-Covid, there was a proportion of owners who were fed up with the industry’s regulation,’ he says. ‘The pandemic just accelerated their retirement wishes or intention to move into another sector.’

Larger groups are often better placed to navigate a highly regulated market, as they are able to invest in compliance and sales teams.

‘Clearly groups can engineer themselves to fare better,’ Kanwar says. ‘But the real reason many people are selling is because demand is so high, and prices are good.’

Brown thinks all operators have been affected. ‘Every business has reassessed itself, including nurseries. I don’t think anyone’s escaped unscathed, from single operators to big groups.

‘An exit is driven by several factors. There’s an array of personal reasons. The attrition we’ve seen is largely natural wastage, but maybe Covid sped some people’s thoughts up. But most people look to exit when they believe their business is worth its maximum amount.’

Donaldson says that while certain factors have impacted recovery for individual nurseries, it is hard to generalise about exactly what has been the difference between success and failure.

‘Every nursery is so different,’ she explains. ‘Some city centre nurseries haven’t got occupancy levels back up, because office workers aren’t back every day. Some owners have told us they’ve seen increases in registrations in suburban or rural nurseries, because parents have decided to take their child out of nursery in the city as they’ll be working from home so much. It’s so postcode specific.’

Steen says elements such as good outdoor space have become even more desirable since Covid hit.

‘Quality outdoor space has become even more important in terms of physical activity and as a means of preventing the spread of Covid-19,’ he explains.


While UK operators do their best to ease themselves out of restrictions and lockdowns, the pandemic has not put off international investors.

In June, Just Childcare was bought by Partou, the largest childcare provider in the Netherlands, while La Maison Bleue, one of the three largest players in the French childcare sector, is continuing its expansion in the UK with the aim of acquiring 50 settings.

International investment does give an advantage to groups, says Brown. ‘You don’t see big platforms turn up for sale that often, but international investors won’t come in for one or two settings, realistically. They’re coming in for ten to 15 at least to make it worthwhile.’


The pending end of furlough, lifting of rent moratoriums and need for loan repayments may see a change to the current situation in the early years market.

‘Banks have been on the whole very supportive to their customers, extending loans and overdrafts, and a number of groups have taken out very sizeable loans to invest in their businesses and meet underlying operating costs over the course of the past year,’ says Donaldson.

‘But soon, some single-asset nurseries or smaller groups that have borne extra expense will need to start repaying those debts, so there could be some distress. The extent of that is still quite uncertain, though, and you would hope it won’t flood the market with distress sales because that could potentially impact on pricing for those who are thinking of selling.’

However, for the most part, there is still optimism.

‘Our pipeline for deals in the next six to 12 months is higher than it’s been for a long time,’ says Brown. ‘That’s got to be a strong indicator for where the market is going. We don’t anticipate any major slowdown unless there is a notable market change, such as a volume of nurseries coming up for sale due to distress.

‘As the pressure increases to go back in to work, we’ve got another surge of people that will have to start thinking about childcare.’

Kanwar is hopeful too. ‘We think the market will continue to recover,’ he says. ‘There could be blips on the way, depending on further restrictions, but by 2023 we are expecting to see enrolment levels back to 2019 levels and beyond. With that will come a higher market value too.’

CASE STUDY: Tops Day Nurseries – adapting to a changing sector

Tops Day Nurseries, with more than 30 settings across Dorset, Hampshire, Devon, Somerset and Wiltshire, has managed to expand during the pandemic, although managing director Cheryl Hadland acknowledges it was touch and go on occasion.

‘At one point I thought we were going to go bust,’ she admits. ‘When the Government announced it wouldn’t pay early years furlough, I just thought, I can’t do this, we are going to go down. I had a very, very bad weekend. Eventually, they U-turned and said we could have a percentage, and at that point, I thought we might survive. But it was that close.’

Pre-pandemic plans to buy a small group were ultimately shelved. ‘I felt like I could hardly cope with what I’d got at that point, never mind trying to buy another group,’ she says.

Since becoming a certified B Corporation, a business verified as meeting high standards of social and environmental performance, public transparency and legal accountability to balance profit and purpose, Tops hoped to be particularly attractive to potential investors.

‘Being B.Corps is quite valuable because investors can see you are sustainable, and a lot of investment bankers are currently looking at companies with sustainability in mind as well as just making money, which is great,’ says Hadland. ‘I think they’re beginning to realise that people who care about the environment and their staff run more sound businesses.’

Hadland spoke to a venture capitalist (VC) about investing in the company, but found the route was ultimately not for Tops. ‘They want you to expand rapidly and then sell to another VC because that’s what makes them money. But it’s hard enough to spread culture and investment in the nurseries you’ve got, without spreading yourself very thin by opening or taking over lots of nurseries at the same time. I’ve mostly expanded by just one or two nurseries a year for 30 years.’

Tops has a new opening slated for October, but Covid, Brexit and the Suez Canal blockage have all added to the difficulty of setting up a new nursery in the current climate. Like Just Childcare, Tops is also considering sale-and-leaseback deals. ‘I’ve got a couple of pension funds that I work with quite closely who own some of my nursery buildings, and the interest rate is less than a VC,’ says Hadland. ‘I want to keep expanding but it needs to be the right expansion. What I can’t do is borrow a couple of million to spend on freeholds.’

The group bought two small settings, in Yeovil and Gillingham, this year, with the help of the Coronavirus Business Interruption Loan Scheme (CBILS).

‘We got about £600,000, which provided cash that was a reassurance we could take a risk we possibly wouldn’t have taken otherwise,’ says Hadland. ‘But knowing we have to pay that back early next year gives us a finite time to turn the nurseries around.’

Since the first lockdown, individual nurseries within the group have recovered to different extents.

‘One of my nurseries is near a train station. A lot of parents commuted into London, and occupancy there has fallen through the floor,’ says Hadland. ‘Similarly with a nursery in a business park. But I’ve also got half a dozen nurseries in hospitals and they did well because parents were working flat out.

‘I wouldn’t now buy a nursery near a station if it wasn’t fully occupied, because it would be so risky. On the plus side, though, staff and parents are moving down towards us on the coast. As the population changes, we have to change to match it.’


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