We have seen a busy start to 2024 with several day nursery transactions having completed in January and February, and a solid increase in new business instructions and offers accepted. Sofia Beck, director – Childcare & Education at Christie & Co shares regional insights

Market overview

This is a continuation of the positive activity we experienced towards the end of Q4 last year, against a backdrop of falling inflation. Despite 2023 being a year of market resets – due largely to cost of capital increases – and inflation and government announcements associated with policy changes, the North West day nursery market remained buoyant, resulting in one of the busiest transactional periods the region has seen in a while.

Last year, there were more active buyers than operators who were looking to sell. This was broadly down to a combination of nursery providers navigating through a difficult shift where they faced increasing operational costs and ongoing workforce challenges, resulting in a continued loss in capacity. We saw a number of smaller settings close due to continued financial sustainability pressures which will no doubt continue this year.

After years of hard work and building a nursery into a strong, sustainable business, it’s vital that an owner gets the highest possible price when they sell, so my advice for owners is always, if they can, to exit on a strong year and when the business is in its best shape to maximise its value. I think many operators recognise this as we’ve seen a noticeable shift in optimism from sellers already this year.

We are also seeing a healthy appetite and demand for high-quality assets across the country which has resulted in a strong pipeline of deals agreed already for the first quarter of 2024 and beyond. The cost of borrowing will become cheaper as rates and inflation fall and day nurseries remain a green-light sector that many banks are keen to support.

Buyer Appetite

Interest is coming from a real range of buyer types in the current market. Corporate operators mainly seek out bigger, 60+ settings that are profitable and performing well, and some specifically prefer more affluent areas where higher fees can be achieved.

Many smaller groups and local operators are seeking out settings that are geographically close to their existing nurseries and are typically more open to buying a distressed business as they recognise the added potential it holds, especially if there is a high-value freehold property included.

We’re also seeing plenty of first-time buyers, some of whom have backgrounds in the early years and education space, as well as those new to the sector who are looking for fully managed nurseries which they can oversee rather than run themselves.

The sale of Little Lambs Nursery

Earlier this year, we completed the sale of Little Lambs Nursery, a successful 50+ setting in Bolton. With funding support sourced through Christie Finance, the business was purchased by Priyanka and Gourav Batra of The Ark Experience Ltd, making it the group’s fourth acquisition. There were several obstacles faced throughout the transaction, with issues arising with the purchaser’s lending process and specifically the financial due diligence.

However, between us we were able to navigate through these difficult points, taking the initiative to introduce a third-party accounting advisor who provided the seller with invaluable help and advice which ultimately saw the deal through to completion. With bank-funded deals such as this, transaction timelines have been extended in the current economic climate with more and more detailed trading information for the business required by the lender.

For more information on the day nursery market in the North West, or for a confidential chat about your business, contact Sofia Beck: [email protected] / +44 7736 616 687