Demand for new acquisitions in the nursery sector is growing rapidly. Courteney Donaldson, Director, Corporate Childcare at Christie and Co, says while demand has now spread from large, cash-rich groups to a 'wide range' of buyers, a key trend is regional and mid-sized nurseries looking to expand, or getting snapped up by large nursery chains.
'There was certainly more activity this summer in terms of regional deals. There has been more demand from buyers from small regional teams. We are seeing the return of the first-time buyer, with nursery groups of two to four nurseries looking to buy more.'
Paul Miller, of Redwoods Dowling Kerr, where nursery sales have averaged more than one per week over the past four years, agrees. 'There are a number of good quality and astute regional and mid-size groups who also have well defined strategies and are actively looking to grow. These groups offer high quality childcare and are pursing strategies which are appropriate to their own circumstances... We predicted that these groups would continue to grow... by purchasing small groups and single settings and that this would enhance their overall value and this has happened. We expect this to gather pace.'
Meanwhile, the top 20 larger corporates have continued to grow, adds Mr Miller.
The biggest deal of the year so far was Busy Bees' acquisition of 12-nursery group Caring Daycare, along with Kinder Care.
Other big 2014 deals include Bertram's acquisition of Oranges and Lemons in Scotland, Old Station Nursery's sale of four nurseries to Children 1st Day Nurseries, Treetops Day Nurseries' acquisition of three Toybox settings and the sale of two Jeffrey's Corner settings to Kids Planet.
Just two years ago, bank lending was stagnant and business outlook gloomier, but now 'cash rich, experienced buyers are getting back on the acquisition trail', says Ms Donaldson.
As a result, there has been a rise in new developments. This includes the £1.5 million purpose-built Woolston Nursery, based in a riverside development in Southampton.
'We've just sold a "turnkey" nursery to the YMCA - the nursery owner was ready to go and they opened. This is a change as developers were hit by the recession and now the number of developments is rising,' says Ms Donaldson.
She also cites a rise in demand in interest coming from overseas 'over the past two years'. 'Since the revised EYFS came out (UK) now offers the childcare of choice for overseas investors coming from places such as UAE, China, US, Europe, Malaysia. Mr Miller adds that the nursery sector is now seen as providing a quality investment for private equity or venture capital funds, though the vast majority of groups are still management team or family owned.
He adds, 'All of the above is leading to a hardening and increase of multiples in key regions where good quality settings are either at a premium or in scarce supply. This applies to both freehold and leasehold settings and will continue. Hot beds include the major conurbations as well as the south; south east; north west, Midlands, Yorkshire and city centre locations in Scotland'.
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