73 per cent planning deal activity as nursery sector consolidation continues

Property adviser Christie & Co has said it expects consolidation in the UK’s nursery sector to continue in 2023, after 2022 saw an “unprecedented” level of deal volume and value. According to Christie & Co’s 2023 Business Outlook report, 73 per cent of childcare and education professionals surveyed said they are planning to either buy, sell or both during 2023.

Christie & Co reported a 48 per cent increase in new instructions between 2021 and 2022, while completions increased 35 per cent. The report indicated that this was driven by the ongoing uncertainty and operational pressures facing owners in the sector, as well as the strength of pricing.

Pricing increased 6.3 per cent last year, while accepted offers were, on average, 17 per cent over asking price as buyers battled to acquire "quality” market share within the sector, pushing valuations up for the most desirable settings.

These figures illustrate how deal appetite and confidence returned strongly during 2022, following a year in which dealmaking was impacted by the ongoing fallout from the COVID-19 pandemic. Dealmaking appetite was driven by pent-up demand in the wake of the pandemic, as operators once again turned to acquisitions in order to drive growth, while ongoing pressures led to an increase in opportunities on the market.

M&A in the childcare and education sectors last year was driven by both growth and distress. Christie & Co’s Managing Director, Childcare and Education Courteney Donaldson commented that “while some businesses were sold for eye-watering prices […] others were unable to keep their heads above water due to financial, workforce, and capacity issues which resulted in an increase in business closures.”

2022 also showed a significant increase in buyers expanding their geographic profile, with 62 per cent of buyers acquiring nurseries within 50 miles of their existing operational hubs, compared to 2021, in which deals largely took place closer to buyers’ current operations. According to Christie & Co, this wider purview was driven by “corporates or groups with a national presence”.

Christie & Co’s Director and Head of Brokerage, Childcare and Education, Nick Brown commented: “2022 was a very busy year, with appetite right across the buying spectrum, from first-time buyers to regional operators, to the larger national groups. We are optimistic about 2023 and hope to see similar trends and activity for quality nurseries across the country.”

Looking forward to 2023, Christie & Co say they expect firms to continue to be impacted by rising energy costs, political instability and base rate increases and forecast an increase in borrowers targeting refinancing for small and medium-sized enterprises. However, the report adds that high-quality businesses are expected to be resilient against external pressures.

For M&A activity in 2023, Christie & Co makes a number of predictions, including that: the best settings, which are most sought-after by buyers, will command premium valuations; buyers will continue to look beyond London and the South East and consider acquisitions in all locations; regional consolidation will continue as operators look to protect their portfolios and footprint; further growth among expanding private equity-backed groups; greater due diligence due to potential policy changes and risk; high levels of demand for specialist childcare businesses and properties; high valuations as a result of demand among corporate and regional operators outstripping supply.



Read more about M&A in the childcare and nursery sector:

Consolidation resumes in the UK’s childcare sector.

Nursery sector consolidation continues as Kids Planet strikes another acquisition.

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