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Property name 1
CHILDCARE &
EDUCATION
Part of an ever-growing sector, many businesses yielding
high earnings have seen increases in value, driven by
continued attraction to investors and eager competitiveness
from buyers teamed with their thirst for high quality.
COURTENEY Our Childcare & Education team has seen average size of a setting currently around
DONALDSON unprecedented prices for quality businesses 44 places, as reported in research by Laing
Managing Director achieved over the past 12 months, albeit such Buisson, larger, purpose-built facilities continue
Childcare & Education may level out during 2019. While a very positive to be organically developed by both national
year for some, the past year has presented and regional groups and sole traders alike, with
a divergent landscape and we expect the many new build settings having capacities of
disparity between success and distress to 100+ places. Compared to new international
Consultancy widen during 2019. day nursery developments, setting sizes of
some 100 places remain smaller than those
INVESTORS AND OPPORTUNITIES seen in some other parts of the world, such as
High quality single assets remain very much in China or indeed Asia. We reported last year
sought after by first-time buyers, existing that Cognita opened the world’s largest Early
providers and new, prospective investors alike, Years Learning Village, providing 2,100 places,
as the sector is increasingly being seen as an some 10 times the size of the largest settings
attractive investment class, offering scope for in the UK, showcasing the potential that exists
solid long-term earnings and success. in some locations to scale up early years
businesses.
Established portfolios that can demonstrate a
The premium proven track record, sound reputation, a solid
prices being
achieved by the
most desirable
and consistent regulatory compliance track
record, ‘clean’ tenure of assets, and a solid and
experienced management team are, subject to
88%
economic and political conditions prevailing, of eligibility codes for
businesses expected to remain attractive, particularly to 30 hours of free childcare
larger corporate groups, new international
throughout entrants and investors. High quality portfolios
validated by September 2018
2018 look likely will continue to attract premiums, with these
to continue into notable arbitrages reflective of value and
recognition of how difficult it is to establish and With the development of new ‘future proof,
2019 as we see grow a quality, successful and densely located purpose designed’ settings increasing, such
an eager pool portfolio with consistent and sustainable are undoubtedly placing pressure on some
earnings. Consolidation opportunities remain local smaller providers. This is pushing many
of new buyers across many of the established childcare and owners to reinvest in their settings and evolve,
continuing to education sectors with existing providers and with growing demands and expectation of
emerge. new entrants increasingly striving to succeed high standards from parents, service users
via consolidation in a bid to pursue buy and and consumers. The past year has seen a rise
build growth delivery strategies, alongside in nursery closures, particularly among the
organic developments. smaller, less commercial, least well-funded
and less viable businesses. Although this has
CHILDREN’S DAY NURSERIES created a new supply of vacant D1 properties
Still a highly fragmented market, with around coming to the market, many of these assets
80% of settings owned by independent have either been in need of significant
operators, UK based children’s day nurseries capital investment in order to reopen or,
continue to see more inbound investor due to configuration and capacity, they
interest which in turn is driving up values are no longer wholly viable for longer term
for the most desirable businesses, fuelled operational daycare purposes. With some of
by competitiveness in the market. With the those assets being unable to compete with
market progression and changes in parentalexpectations, some have reverted to strong and activity is anticipated to gain
prior use, which in many cases has been pace especially across mid-market
conversation back to historical former use pricing points of between £5 million and
as a single residential dwelling. £50 million.
Research by NDNA highlighted a 66% USPs, such as LOOKED AFTER CHILDREN AND
increase in closures between September enrichment services, YOUNG PEOPLE
2017 to 2018, attributing this to the
introduction of the 30 hours of free bilingual curriculum Children’s homes and foster care
businesses are continuing to see high levels
childcare policy. While we can see that the and cutting edge of activity as the fragmented nature of the
policy has had a material impact on many
operators, some have been better prepared
technology, are market provides a variety of opportunities
for trade buyers and investors alike, with
to cope with it than others, dependent on becoming increasingly
demand continuing to outstrip supply.
location, service offering, USPs and the more prevalent.
commerciality of the operator or owner. Children’s homes, in particular, look set to
see capital value growth during the year
As at September 2018, following a
ahead. With local authorities beginning
12-month implementation, 88% of
to increase their referrals back toward
eligibility codes for 30 hours free childcare
children’s homes, there is a significant
had been validated, showing that the
shortage in supply, and this is expected
majority of the impact the policy has had rates, and so warranting sustainable fee
to fuel demand from business property
on the sector has occurred, however there rates and increasing operational capacities
buyers during 2019.
is scope for additional pressure as take- are potentially routes which could be
up reaches capacity for Local Authority taken to mitigate or offset sustainability SPECIALIST CHILDCARE
funded places. pressures. Post Brexit, scope to review
staffing ratios and re-examine floor area Trade and investor interest has continued
A growing trend has been the increasing utilisation would be welcomed, awarding unabated during 2018, as businesses that
introduction of full day care provision on operators wider choice and flexibility in provide specialist care and education
primary school sites. Maintained sector order to operate in a more efficient, cost- for children and young people continue
nurseries in many cases have historically effective manner. to draw interest from a wide pool of
been in receipt of higher local authority acquisitive buyers. Alongside this, organic
fee rates, in comparison to rates awarded INDEPENDENT SCHOOLS new business developments have been
to the private sector, we have seen an evident, with, amongst many others, 2018
The landscape for independent schools
increase in school-based provision. seeing the opening of Brookways School
is mixed, with private ‘for profit’ schools
in North Cheam, adding to the Keddleston
Historically having offered term time typically falling into one of three groups.
Group’s portfolio of specialist day and
provision, there is evidence of school The elite and prestigious private UK
residential schools.
settings striving to become more schools have been able to maintain high
commercial in extending from term time occupancy and school fees, assisting in Overseas, against the backdrop of
to full day care, with wrap around services, offsetting increasing operational costs. the Dubai Disabilities Strategy 2020,
albeit private sector provision is typically far an aspirational vision to create a fully
However, mid-market schools located in
more adept in this respect. inclusive education system for children
pockets of London, the South East and
and young people with SEND is being
As owners strive to differentiate their Home Counties are having to become
realised. Riverston School, the first of its
business from others, USPs, such as increasingly commercial in order to
kind specifically catering for students
enrichment services, are becoming ensure a healthy financial operation and
with specialist needs or as referenced by
increasingly important and more prevalent. ensuring profitability with necessary
the regulator, Children of Determination,
For example, bilingual offerings, provided financial reserves.
opened in Dubai in 2018.
by London-based Chinese-English group The private independent schools which
Hatching Dragons, skills development are most at risk are those located outside
BREXIT & POLITICAL CHANGE
through skiing or swimming lessons as of London and the South East, with As with any other business, the impact of
offered by North West regional group Kids significant erosion in pupil numbers and Brexit is likely to be felt through the overall
Allowed, or sensory immersive children’s little capital to reinvest. We anticipate economic state of the UK and confidence
activity rooms fitted with cutting edge increased evidence of distress during 2019 in the country overall. While a weaker
augmented reality, as found in newly for this cohort of schools as costs rise and pound may fuel inbound activity from
opened Rocket Productions, Chelsea. surpluses decrease. overseas investors, domestic opportunities
Fixed costs continue to increase year on may be impacted as UK owners or investors
Distressed assets aside, we expect the will seek to divest risk.
year for staffing, operations, and business independent school market to remainAcross the Childcare & Education nursery and independent school
2017 10.8%
sectors, there may be some challenges sectors, including reviews of the funding
with visa issues impacting staff supply system, regulatory policy, and cost
2016 9.7%
or a reduction in consumer supply as frameworks, could be the greatest
2018 8.0%
families who migrated to the UK might challenge of all.
relocate due to changes in policy.
However, over many decades, the UK This could be an incentive for business
day nursery sector has demonstrated owners, entrepreneurs and returns
resilience, with the best invested hungry investors to leave the sectors
and prepared businesses being best should political change seem evident
equipped to weather potential change and likely to impact on policy, consumer
and challenges ahead. demand, revenue, operations costs, and
associated diminution in returns and /
Aside from Brexit, in the event of a snap or substantial changes to tax positions,
election and the effect of a potential control and /or business governance.
change in government, which would We could see an influx of sales coming in
Movement in average
result in an immediate overhaul of 2019 if such were to happen.
prices, year on year
a variety of aspects across both the
JANUARY 2018
CASE STUDY CASE STUDY
Yellow Dot & Mace Montessori, Project Queen, UK
UK
A key transaction in the Specialist
Christie & Co brought both Yellow Childcare sector, Christie & Co was
Dot and Mace Montessori portfolios instructed on the portfolio sale of seven
to the market in 2018, which were residential children’s homes and a
Project Regal
subject to competitive processes and extensive offers from specialist school, located across the Midlands and East Anglia,
a host of UK, European and wider international buyers from by Direct Care Ltd. The group, a mix of freehold and leasehold,
across Asia, Hong Kong and China. Multiple portfolio sales maintained an exceptional reputation and gained substantial
have been brokered by the team this year, but these two
I N F O R M AT I O N M E M O R A N D U M interest from a range of regional and national operators when
transactions are especially noteworthy due to the volume of brought to the market, demonstrating the high demand for
offers presented by carefully vetted potential buyers in an off- these types of businesses. It was ultimately purchased by Keys
market process, and the premium tone of offers received. Group, a leading provider of innovative care and education
services for children and young people with complex needs.
MARKET PREDICTIONS
We predict that we will Quality UK single nursery Demand for UK residential
see a marked increase in settings and portfolios with schools for children and
independent school closures solid sustainable earnings young adults with SEND
during Q1 & Q2 2019, notably will remain sought after, will remain high and the
in relation to schools located but the void between children’s residential care
outside of London and the successful, stagnant and market will increasingly
South East. Particularly failing businesses will widen. strengthen, as demand
with the Teachers’ Pension We expect to see further continues to exceed supply.
Scheme contribution rate competition as more school- Foster care businesses,
increase from 16.48% to based providers presently especially those with access
23.6% from September offering reception classes to large cohort family
2019, this will be a further extend into full day care placements, will
and potentially final blow for provision. also continue to attract
many already struggling with premium prices.
sustainability.MAJOR TRANSACTIONS / CHILDRENS DAY NURSERIES
DATE VENDOR PURCHASER DEAL
February Little Rascals Nurseries ICP Nurseries Group of two outstanding nurseries in Tunbridge Wells
March Yellow Dot Group Ltd Bright Horizons Group of 12 high quality settings in and around Hampshire
Cranbrook Nursery
April Elan Nurseries Ltd Group of 3 Impressive Nurseries Located in the South East
Group
April Playtime Nurseries All about Children Group of three impressive nurseries located in the South East
May Mace Montessori Schools Busy Bees Group Nine high profile day nurseries with one school, all in Central London
May Abbeywood Tots Ltd Just Childcare Four premium leasehold settings in Bristol
July Daisy and Jake Nurseries Busy Bees Group Expanding group of six thriving purpose built settings
September Miss Daisy Nursery Group Dukes Education Purchase of Miss Daisy’s Group, comprising four premium nurseries in London
Kiddi Caru/Les Petits
October Headstart Nurseries Ltd Group of four exceptional childcare settings across the Home Counties
Chaperons Rouges
November Swingboat Nurseries Ltd Storal Learning Group of three exceptional freehold nurseries in Derbyshire
November Elmwood Nursery School Hjalli Model Ltd 87 place nursery sold to Icelandic nursery group, marking their first venture into the UK
MAJOR TRANSACTIONS / INDEPENDENT SCHOOLS & EDUCATIONAL BUSINESSES
DATE VENDOR PURCHASER DEAL
A long standing all girls school purchased by Ipswich Education Ltd led by London
and Oxford Group. London Oxford Group was founded by Swiss corporation bankers
January GDST Ipswich Education Ltd
and is backed by China Wanda Group. Upon completion the School became a
co-educational provision
February Rosemary Edie Robin Batlen Sale of Hazel Hurst Prep School, a closed school in Nottinghamshire
Malvern International
July Richard & Marzena Mace Communicate English School sold in a £2.34m deal
PLC
July Prowting Family Concerns Heather Partnership A consortium of parents purchased Heathcote Preparatory School in Danbury, Essex
Windrush Valley School Fung King Jacqueline Windrush Valley School in Oxford was purchased by a Chinese investor with education
August
Limited CHUNG investment interests
Westonbirt School, an independent day and boarding school for girls near Tetbury in
September Westonbirt Schools Limited Wishford Schools
Gloucestershire
Full Circle Education St Bees School Cumbria was purchased in 2017 by Chinese investor, Full Circle, and
September St Bees School
Group received significant investment to once again open its doors in 2018
Inspired Learning, a UK based education provider, acquired the K12 unit of
September ACG Limited Inspired Learning
New Zealand’s largest private school operator, ACG
Dukes Education acquired 75% or more of the shares in Knightsbridge School,
September Knightsbridge School Ltd Dukes Education
an independent preparatory school in London
Midlothian Capital Private investment company, Midlothian Capital Partners purchased children’s
October PGL Travel Limited
Partners adventure holiday company, PGL, in a £467m deal
UK school’s operator Dukes Education has acquired Minerva Education, a group of five
October August Equity Dukes Education
London-based independent schools, from August Equity
Bright Scholar Manage- Bournemouth collegiate was acquired by Bright Scholar, which currently has more than
October Bournemouth Collegiate
ment Limited 35,000 pupils studying at its 67 schools across China
The largest education transaction of 2018 was agreed in September. The sale of
December Cognita Schools Limited Ltd Jacobs Holding Cognita Schools Limited to Jacobs Holding, a Swiss investment firm, is set to complete
imminently, subject to regulatory approval, with a price tag of £2bnMAJOR TRANSACTIONS / SPECIALIST CHILDCARE
DATE VENDOR PURCHASER DEAL
Aspirations Care Childrens
February Keys Group Ten homes and two schools
Division
February Kingdom Care Keys Group Two residential homes
March Alliance Care & Education Keys Group Four residential homes and two colleges
August John Edwards Care Homes Ltd Montreux Group Sale of a group of three CQC and Ofsted registered homes
October Direct Care Limited Keys Group Portfolio of seven children’s homes and a specialist school
November Full Circle Care Aspire One Care Ltd Children’s home in Manchester
CONTACT US
Courteney Donaldson MRICS Martin Daw Vicky Marsland
Managing Director – Childcare & Education Senior Director – Childcare Scotland Business Agent – Childcare Yorkshire &
T: +44 (0) 20 7227 0700 T: +44 (0) 131 524 3406 North East
M: +44 (0) 7831 099 985 M: +44 (0) 7764 241 280 T: +44 (0) 161 833 6914
E: Courteney.Donaldson@christie.com E: Martin.Daw@christie.com M: +44 (0) 7526 175 857
E: Vicky.Marsland@christie.com
Nick Brown Rosie Adlem
Regional Director & Head of Brokerage – Director – Childcare & Education UK Carolyn Quinn
Childcare UK & International Business Agent – Childcare South West &
T: +44 (0) 20 7227 0700 T: +44 (0) 20 7227 0700 South Wales
M: +44 (0) 7764 241 316 M: +44 (0) 7764 241 309 T: +44 (0) 121 452 3710
E: Nick.Brown@christie.com Email: Rosie.Adlem@christie.com M: +44 (0) 7526 175 851
E: Carolyn.Quinn@christie.com
Sofia Beck Emma Govan
Associate Director – Childcare North West Business Agent – Childcare Scotland Daniel Cohen
T: +44 (0) 161 833 6915 T: +44 (0) 131 524 3401 Business Agent – Childcare London &
M: +44 (0) 7736 616 687 M: +44 (0) 7702 809 595 Northern Home Counties
E: Sofia.Beck@christie.com E: Emma.Govan@christie.com T: +44 (0) 20 3846 0618
M: +44 (0) 7526 175 852
Sophie Willcox Nicola Oswell E: Daniel.Cohen@christie.com
Associate Director – Childcare London & Business Agent – Childcare North West
South East T: +44 (0) 161 470 7830 Lucy Mclean
T: +44 (0) 20 3846 0619 M: +44 (0) 7701 313 484 Business Agent – Childcare London &
M: +44 (0) 7736 620 855 E: Nicola.Oswell@christie.com East Anglia
E: Sophie.Willcox@christie.com T: +44 (0) 20 3846 0612
M: +44 (0) 7855 489 281
E: Lucy.Mclean@christie.com
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