Courteney Donaldson, Director & Head of Child Centric Sectors at Christie + Co, looks at the provision of investment opportunities in the early years education sector.

1. Courteney Donaldson BSc (Hons) MRICS, Director & Head of Child Centric Sectors
presents at the EducationInvestor Summit 2015
Early Years Education:
An Investment Hotspot?

2. 14/05/14
Early Years Education: An Investment Hotspot? 2/20
Landscape, Growth and Composition of the UK Early
Years Sector

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Early Years Education: An Investment Hotspot? 3/20
Capacity of the UK Children’s Day Nursery Market
2002-2014 (0000’s)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Nurseries Total Places

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Early Years Education: An Investment Hotspot? 4/20
Sector Overview:
• Under 5’s population is a significant demographic driver of demand
• 15,490 nurseries in the UK with an average capacity of 47 places
• Between 2010-2012 the has been an 8% growth in mothers aged over 30 having
children
• 60% of mothers with children under 4 yrs are in employment
• 42% of mothers work full time, compared to 32% in 2003
• Occupancy patterns have changing with a shift toward an increased combination of
formal and informal care utilisation
• 46.5% of children attend either 3 or 4 days per week
• Average fee £37 per day (£185 pw) – Greater London £47.50pw (£237.5pw)
• While significant regional fee variances, groups achieve higher average fees £220
per week
• A highly fragmented sector – The two largest groups, Busy Bees (239 settings) and
Bright Horizons Family solutions (208 settings) have a combined market share of
5.2%
• Organic growth opportunities remain
• Location is paramount to performance

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Early Years Education: An Investment Hotspot? 5/20
Structure of the Market
UK Nursery Group Market Distribution is Highly Fragmented
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0
50
100
150
200
250
300
Total Nurseries
Market Share %

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Early Years Education: An Investment Hotspot? 6/20
Early Years Transactions Update

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Early Years Education: An Investment Hotspot? 7/20
UK Transactions
UK Transactions – Summary Illustration
September
2012 – Busy
Bees
acquire Just
Learning, a
portfolio of
71 settings.
£70M deal
price
reported
April 2013 –
Bright Horizons
acquire
Kidsunlimited 64
settings - £45M
deal reported
October 2013 –
Ontario Teachers
Pension Fund
acquire majority
shareholding in Busy
Bees, a Portfolio of
213 nurseries in a
circa £220M deal
May 2014 –
Four
nurseries
owned by the
Old Station
nursery group
sold to
Children First
nursery group
August
2014 –
Magic
nurseries
acquire The
Laurels
group – 8
settings –
Price
undisclosed
October 2014 -
Mace Montessori
acquire Fortune
Green Nursery
North West
London
January 2015 -
Busy Bees
acquire 48
nurseries in
Singapore and
12 in Malaysia
from
Knowledge
Universe
March 2014 –
Busy Bees
acquire Kinder
Nurseries
comprising 11
nurseries in
Kent and one
in Lewisham.
Price
Confidential
July 2013 - August
acquire Minerva
comprising Eaton
Square and
Ravenstone School.
Price Confidential
February 2013 –
Treetops acquire
Toybox Nursery
Group. Price
Confidential.
June 2014 – Busy
Bees, the largest
provider in the
UK, purchased
Caring Day care
Nursery group
comprising 12
settings
March
2015 -
Peaches
West
Midlands
group
acquire
Springtime
nursery in
Streatham
May 2014 –
Bertram
Acquire
Oranges and
Lemons a
portfolio for
four settings –
Price
Confidential
April 2014 –
Treetops
acquired Happy
Child Nursery
Group
comprising 15
Nurseries in
London. Price
Confidential
May 2012 –
Bright Horizons
acquired
Casterbridge
comprising 27
settings – Deal
Price - £70M
reported
November
2014 –
Phoenix
announces
investment
into Just
Childcare .
April
2012 –
ISIS
invest
£3.7m in
Happy
Days

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Early Years Education: An Investment Hotspot? 8/20
Single Trading Assets and D1 Property Sales
• Leasehold nursery
• 5 years remaining £6k pa rent
• Registered for 20
• Turnover £75,000
• Sold off £40,000 asking price
• Long Leasehold Nursery
• Registered for 100
• Turnover £837,144
• EBITDA £239,000 (28%)
• Sold off £1.3M asking price
• Freehold nursery
• Registered for 58
• Turnover £293,000
• EBITDA £89,000 (30%)
• Sold off £470,00 asking price
London
Cheshire
peterhead
• Freehold
• Existing D1 consent
• Sold with vacant possession
• Circa 3,376 sq ft
• Sold off an asking price of £725,000
• Freehold
• Sold with vacant possession
• Property with D1 consent
• Circa 5,3926 sq ft (GIA)
• Sold Off an asking price of £1,200,000
• Freehold
• Church Hall
• D1 planning use
• Freehold
• 1,962sq ft (0.31 acre)
• Sold £285,000
Camberwell, London
Muswell Hill, London
Morley Green Church, Nr Wilmslow

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Early Years Education: An Investment Hotspot? 9/20
Case Study – Investor Entrant
 Irish Investors Lydian Capital Partners
 Christie + Co facilitated platform investment in 2005 & provided Vendor
valuations and advice on exit
Timeline
2004
First acquisition
of the Dolphin
Nursery chain (5
settings)
Total – 5 settings
2005
Acquisition of the Hatton Hill
Nursery Group (5 settings) in
June and Caterham Nursery
(a single setting)
Total – 11 settings
2006
Acquisitions of
Saplings Nurseries in
February, Barnstead
Nursery in May,
Children’s House in
July & Tassel Road in
November
Total – 18 settings
2007
Acquisitions of Sam Bell (2
settings), Starfish Nursery
(1) and Kings Hill Nursery
(1)
Total – 22 settings
2008
Acquisitions of
Inglewood (1 setting)
in April, Richmond
Nursery (1) and
Wembley Nursery (1)
Total – 25 settings
2009
Acquisition of
Weybridge (1 setting)
in September
Total – 26 settings
2010
Sale of Verwood
Nursery a single
setting
Total – 25 settings
2011
Acquisition of
Springfield Nurseries (2
settings)
Total – 27 settings
2012-14
Roll out strategy
included the opening of
new settings in Clapham
Common, Wimbledon
and Crouch End
May 2012
Casterbridge Nurseries
comprising 27 settings
and three development
sites are sold to Bright
Horizons Family
Solutions in a deal
reported at £70m

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Early Years Education: An Investment Hotspot? 10/20
UK Early Years Outlook & Scope for Consolidation

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Early Years Education: An Investment Hotspot? 11/20
Outlook & Scope for consolidation
• Sector confidence is high and the outlook remains positive
• Childcare is a necessary rather than a discretionary spend
• Government childcare policies seek to support working parents & families
• Consolidation opportunities exist but consolidation can be challenging
• UK national and regional groups, investors & overseas trade buyers all seek acquisitions
• Demand from buyers for quality settings, especially in the South, exceeds supply
• Premium prices achievable for prime businesses
• High demand for ‘value enhancement deals’

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Early Years Education: An Investment Hotspot? 12/20
Identifying opportunities: What to look out for:
• Location
• Capacity
• Fee levels
• Occupancy
• Ofsted
• Staff retention
• CAPEX
• Quality of MI
• Performance / EBITDA
• Value Added Opportunities
• Competition
• Price & Returns

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Early Years Education: An Investment Hotspot? 13/20
Valuation Methodology
Profits Method
The profits method of valuation applies an
all-risk YP (years’ purchase)/multiplier to
the fair maintainable operating profit to
provide a capital value. This value includes
the property interest, business or locational
goodwill, and fixtures and fittings, all as a
single figure. It is not the sum of the
constituent parts.
Personal goodwill, attaching to a particular
operator, should not be included. This
effectively departs upon a disposal.
The YP selected is derived from market
evidence.
Registered capacity 100
Average fee £220
Occupancy 75%
Turnover £825,000
Wages £453,000 (55%)
Other Operating Costs £136,000 (16.5%)
FMOP £236,000 (28.6%)
YP 6.75
Market Value £1,595,000

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Early Years Education: An Investment Hotspot? 14/20
Early years Education: An Investment Hotspot?

15. 14/05/14
Early Years Education: An Investment Hotspot? 15/20
T: +44 (0) 20 7227 0766
M: +44 (0) 78310 999 85
E: courteney.donaldson@christie.com
@courteneyccs
@ChristieCoUk
W: www.christie.com
Courteney Donaldson MRICS
Director & Head of Child Centric Sectors

16. 14/05/14
Early Years Education: An Investment Hotspot? 16/20
• We have been providing brokerage and professional advice for over 80 years
• We have16 UK and 14 international offices
• Specialists Sectors include Childcare and Education:
o Early Years Childcare
o Mainstream and Specialist Education
• We inspect over 15,000 businesses annually
• Our clients include owners, Banks and Investors
• We employ 200+ highly experienced business agents, Chartered Surveyors and consultants
• We have advised on every major UK Childcare transaction since 2006
• During 2014 alone we advised on childcare, education and care businesses with an aggregate value
in excess of £1.6bn
• We provide services across the entire business lifecycle from conception to exit
Introduction to Christie + Co