M&A activity within the UK's early education sector has continued apace in recent weeks, marked by several transactions. These include Busy Bees’ acquisition of two nurseries in Scotland, Kindred's purchase of the Alphabet House group in Nottingham, Kids Planet taking over Giggles and Wiggles in Staffordshire, Happy Days’ purchase of The Hollies in Cardiff, and Bright Stars buying High Hopes in East Cheshire.
Alongside a number of other deals that are mid-process, this highlights the continued strength of M&A activity in the nursery sector relative toother industries, underpinned by its continuing investment narrative and the strategic positioning already undertaken by existing industry consolidators.
However, we must remain cognizant of the fact that interest rates are projected to rise further, potentially reaching 5.75 per cent, as part of efforts to curb inflation.
Although the latter half of 2023 was initially anticipated to see an upswing in general M&A activity, this potential rise in rates may consequently lead to more rigorous due diligence procedures and reduced valuations. Evidence of this trend is already emerging, as we've noticed that many transactions are taking longer to finalise and some deals are even falling over.
Turning our attention away from immediate transaction activity, it's crucial to address the ongoing early years consultation.
The consultation's aim is clear: to boost staffing numbers to alleviate existing pressures and fulfil the proposed new funding offer for children under three years old.
As is often the case with prospective changes, there is a wide array of opinions relating to the outlined suggestions, particularly on implications for qualifications and quality.
However, the truth is that there are no easy answers on how to address both current and future staffing requirements without some form of ‘compromise’.
Another issue is the necessity to develop the physical capacity to accommodate the expected increase in demand. It is something that should be incorporated into planning strategies.
