Business Overdrafts
Be financially flexible with a business overdraft.
Guide to buying or selling a children's day nursery
Read time : 5 mins Added: 20/02/2023
The childcare and education sector is highly specialised and dynamic, so when looking to buy or sell, obtaining quality and professional advice from an experienced broker is absolutely crucial. We’ve asked sector professionals Christie & Co to put together a guide about the essentials you need to consider.
Selling a childcare business
This short step-by-step guide highlights the different stages of selling a childcare business. This can be a complicated process, so a specialist childcare agent would be able to assist at all stages, from finding you the right buyer for your business and maximising its value via offers, all the way through to completion. Knowing your buyer profile and how they operate is also very important, as we all know the highest offer may not be your best offer.
1. The process starts – your agent should provide you with some specific advice about the market in your area and nationally, the type of buyer your nursery will attract and general pricing parameters. They would then arrange to meet you, confidentially, and discuss your plans in more detail. Key points to consider would be the sale structure and property status i.e. freehold/leasehold/long leasehold, and if you want to keep your property. Is it a limited company sale?
2. Terms agreed with the agent – armed with the necessary information, your agent should provide you with a formal proposal to act on your behalf. This would include fees, deal timetables, how they arrived at your asking price – all the vital pieces of information you would want to be made aware of.
If you wish to proceed, terms of engagement will be agreed, and the business would need to be prepared for sale. Make sure the person you see deals with your sale. All too often, your business can get passed to a call centre and be dealt with by someone who has never seen your nursery.
3. Marketing collateral is produced showcasing your nursery. An ‘Information Memorandum’ is prepared which is a confidential document providing full details about the business. It typically would include full colour photography, a virtual tour and floor plans so that interested parties can make an accurate assessment of whether it is suitable for their needs prior to visiting.
4. Your nursery is launched to market – this can be done on a highly confidential basis or through general marketing channels. A shortlist will be compiled featuring quality purchasers who can obtain funding to avoid wasted time – your agent should guide you here. Your specialist childcare agent will qualify interested buyers and arrange viewings, with the option of confidentiality statements if required.
5. Offers are made – many new opportunities attract multiple offers in which case, a date is set for ‘best and final’ offers. Your agent should manage this process for you and report back with a detailed analysis of the bids to enable you to make an informed decision about which is best for you. Competitive tension between parties is what your agent should be looking to achieve to maximise your value.
6. Contracts are drawn up – assuming an acceptable offer has been received, a Memorandum of Sale is then forwarded to solicitors and accountants who begin their phase of work on the deal. Choosing the right lawyers with experience of the sector is also incredibly important.
7. Due diligence takes place – the transaction progresses, the buyer and their advisers carry out ‘due diligence’ which is a detailed appraisal of the business including all legal and financial matters. It is very detailed and can take a number of weeks. If the buyer needs bank funding, then a formal independent valuation will be needed as a basis for a lending decision.
8. The Ofsted registration process begins – it can be managed either personally by the buyer/seller or typically via the solicitors or a third party. This is made much simpler if a company is being sold rather than an asset sale, as the first is a change of director, the latter is a full re-registration.
9. Contracts are exchanged, making the deal unconditional unless specific conditions have been included. Completion follows either on the same day or (in the case of an asset sale), a few days later.
Buying a childcare business
Before you purchase a business, it is essential to take the time to make sure that owning your own business is the right move for you. Here we provide some ‘top tips’ for what to consider when buying a childcare business, whether you are a first-time buyer or looking to expand your current portfolio.
Preparing your CV
Do you have what it takes to own and run a childcare business? Building a CV will help you establish if you are ready to look for your own business, not only because it helps you think about yourself clearly, but because it will show others – lenders in particular – that you have the right skills for the business you plan to buy.
Have you got the finance you need?
The first consideration when seeking to buy a business is how much you can afford, and to a large degree this will be determined by the size of your cash deposit and whether you are looking at buying a freehold or leasehold opportunity. Decide whether you want or need to borrow money.
You may have an investment, inheritance, or pool of savings that will allow you to buy a business outright. Or you may want to invest some of your assets in a business and use the business to partly finance the borrowing costs – if so, you need to be clear about how you’re going to fund this.
Finding the right nursery business
It is essential that, alongside making web and press-based searches for possible nursery acquisition opportunities, you speak directly to specialist childcare agents and tell them about your specific requirements. These agents can determine which available opportunities may be suited to you, and they may ask you to sign a non-disclosure agreement (NDA) prior to any confidential information, such as sensitive trading information, being released to you. When contacting a specialist agent, they can help you establish your specific requirements.
Get help from trusted advisers
Once you have identified opportunities of interest, you will need to consider further information – both operational and financial. Having viewed available businesses, you can start to formulate offers and begin negotiations. Look to speak with solicitors and accountants to understand legal process requirements, types of deal structures, tax implications etc – ideally those who have other childcare clients. A specialist childcare agent can point you in the right direction. It is essential that you surround yourself with these professionals and tap into the right advice and support to ensure your acquisition is as seamless and stress-free as possible.
Christie & Co has one of the largest specialist Childcare and Education teams and would be delighted to assist any potential buyer or seller on making those all-important first steps. Nick Brown Director & Head of Brokerage – Childcare & Education UK.