buying a nursery
There are signs that things are beginning to
move again in the nursery acquisition market. Some potential
buyers have funds being made available to them and those keen to
sell are beginning to accept that prices have shifted form their
high values of a few years ago.
A nursery, of course, is not just a building –
it is a business with staff, children, debtors, creditors, and
other features with which a potential buyer will need to become
familiar. Here are some of the matters you should consider if
you are thinking of buying a nursery or nursery chain.
- How is the deal to be structured? Are you
buying the shares of a company from the current shareholders or are
you buying the assets and business, but no shares? For a buyer, a
purchase of shares means you get the liabilities as well as the
assets, which can be a disadvantage and may mean more
investigations before you sign the contract. However, a purchase of
assets can be complicated as the contracts with the customers of
and suppliers to the business will need to be transferred to
you. That alerts them to the fact that there has been a sale,
which you may not want to do.
- Do a realistic assessment. If any of
the settings are struggling what are the reasons? Can you,
realistically, sort out the problems?
- Restrict to a minimum the number of people
(even internally) who need to know about the deal, to reduce the
chance of information leaking out to rival buyers.
- Although it is generally the seller who will
want the protection of a confidentiality agreement, negotiations
may reveal information about your business that you do not want
revealed or used by the seller and therefore you may want a
confidentiality agreement in your favour too.
- Research the properties from which the
settings operate. Are they freehold or leasehold? What
is the history of the sites? Are there any environmental concerns?
Are you likely to get planning permission if you want to
expand?
- Is there any history of complaints,
unsatisfactory OFSTED inspections or serious accidents that need to
be investigated?
- What are the staff terms of employment? Do
they ‘fit’ with those of your existing staff or are they going to
cause friction? They cannot be changed without the agreement of
each member of staff.
- A financial ‘due diligence’ report prepared
by an accountant is useful. It may reveal over valued assets, tax
issues or unexpected liabilities. It may give you reasons to
renegotiate the purchase price or, in the worst case, deter you
from the purchase.
- Be careful about spending time negotiating
‘heads of terms’. They should help you and the seller agree points
of principle but they can be an unhelpful and a time-consuming
distraction.
- Get a valuation from someone who knows about
the sector. Buyers can have unrealistic expectations about prices.
You may have to pay over the odds to make a strategic purchase but
at least be aware that is what you are doing.
points to note
- Allow time for the investigations so that you know what you are
buying
- A nursery is not just a property – there is a business
that needs to be considered
- Make sure you can fund the deal - calling off negotiations
because you can’t raise the money is not good for credibility
- Get legal and accounting advisers on board early on. They cost
money but can avoid expensive mistakes.
