Survey results reveal 2023 to be a busy year for day nursery marketplace

The business reported that, in 2022, the volume of childcare and education deals completed and the value and volume of offers received reached unprecedented highs. Additionally, offers accepted sat at an average of 17 per cent over asking price which illustrates acute competitive market tension between buyers to secure the most desirable nurseries and gain ‘quality’ market share.

Throughout the year, Christie & Co saw a huge amount of interest for a range of day nurseries across the UK from a pool of well-funded buyers. Appetite was strong for both freehold and leasehold opportunities, although there was a shift in trend towards sellers choosing to retain their freehold properties and just selling the business in isolation, thus providing an annual income as well as a lump sum premium.

Impressive prices continued to be achieved for the most desirable nurseries with robust and up-to-date information, for both single assets and portfolios in sought-after cities and regional hubs, including London, the Midlands, and the South East as well as Leeds, Greater Manchester, Bristol, Glasgow, and Edinburgh. The broker expects this increase in regional demand to continue well into 2023.

From 2021 to 2022, Christie & Co saw a 48 per cent increase in new instructions, and a 35 per cent increase in completions which substantially exceeded pre-pandemic volumes. This can, in part, be attributed to a surge in both owners facing ongoing operational pressures and uncertainty for the year ahead, and those wanting to capitalise on the strength of pricing in the market which, it reports, saw a 6.3 per cent increase last year.

While in 2021, buyers were mostly acquiring day nursery settings close to home, in 2022, they looked further afield, with the majority (62 per cent) buying within 50 miles of their current operation/residences, and approximately a third buying within 30 miles of existing hubs. Those purchasing settings over 50 miles away increasingly represent corporates or groups with a national presence.

Global Early Childhood Education and Care (ECEC)

2022 saw some very notable international activity with trade buyers across different continents acquiring high-quality ECEC platforms in new territories, for example, Sodexo’s Childcare Services business merger with Grandir, and Bright Horizons’ acquisition of Only About Children. Investment activity also gained momentum, with Canadian private equity firm, Onex, selling its majority stake in Partou to former minority shareholder Waterland Private Equity Investments and, just four months later, Partou acquiring All About Children, which marks the provider’s second UK deal following its acquisition of Just Childcare in 2021.

For investors, trade buyers, and those successfully completing the sales of their international portfolios, 2022 was a landmark year, says Christie & Co, and it anticipates a very busy international ECEC marketplace in 2023, with further consolidation opportunities to emerge and significant merger and acquisition activity ahead.

Sentiment Survey

The business property adviser anonymously surveyed childcare and education professionals from across the UK to gather their views on the year ahead. When asked about their sentiment for 2023, 33 per cent said they feel positive, 35 per cent feel neutral, and 32 per cent feel negative. When asked about their sale and acquisition plans, 73 per cent said they’re looking to either buy, sell or both in 2023.

Funding Landscape

In a segment on funding in the sector, Christie Finance notes that, in 2023, there is likely to be an increase in borrowers seeking refinancing opportunities. Some SMEs that have seen diminishing revenues and earnings could encounter reduced enthusiasm from their incumbent lenders, subject to business specifics and financial performances. Despite energy costs, base rate increases, and a mass of political changes, financially sustainable, high-quality, well-managed childcare and education businesses with good leadership should remain a stable lend for banks and investors.

Market Predictions

In the year ahead, Christie & Co expects:

• Continued consolidation between national and regional day nursery groups
• The market will continue to be resilient in terms of quality and offering against external challenges and pressures
• Premium childcare settings will remain highly sought-after by buyers, commanding premium prices
• All locations will be considered by buyers as they expand out of London and the South East
• Regional consolidation will continue as operators strive to protect their portfolios/footprints
• Expanding private equity-backed groups will show signs of further growth over the coming years

Nick Brown, Director and Head of Brokerage – Childcare & Education at Christie & Co, comments, “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. The competitive tension we have been able to create in deals which we have been involved in has resulted in market-setting prices being achieved and activity in areas of the country which have previously not been seen as hotspots. We are optimistic about 2023 and hope to see similar trends and activity for quality nurseries across the country.”

Courteney Donaldson, Managing Director – Childcare & Education at Christie & Co, adds, “Despite the many headwinds in the international early childhood education and care (ECEC) markets, we predict that that global mergers and acquisitions will increasingly feature in corporate providers’ strategic plans throughout 2023 and beyond, with transaction volumes gaining pace as operators take advantage of international expansion opportunities.”

For the full report, visit: christie.com/business-outlook-2023

For further information on this press release, contact:
Phoebe Burrows, Corporate Communications Manager
P: 07540 063 598 or E: phoebe.burrows@christie.com