This summer, Cairneagle undertook a survey of more than 60 nursery operators to gauge their views on the current market conditions. The results provide further colour to the well-documented key issues:
- Staff turnover levels are now double those of 2019. Over two-thirds of operators have had occupancy impacted by staffing; over half of respondents have had to close rooms or reduce hours in the past three months; and more than 60 per cent have had to hire agency staff to meet demand (impacting profit margins.
- In response to high inflation, half of respondents are planning to increase fees at a higher rate than expected, and 15 per cent of respondents are planning two increases this year. Operators of premium nurseries expect their demand to be more protected from increasing fees than operators of less-premium nurseries.
- Just over half of operators are expecting declines in demand in the next six months due to economic uncertainty, with almost half having already noticed changes in parent patterns. However, nurseries with a larger mix of professional working parents are expected to be less impacted (as was also the case in the 2008 economic crisis).
In the context of these conditions, it is critical to tread carefully in terms of nursery strategy and in protecting or unlocking value.
It is therefore as important as ever for buyers to take a considered approach to acquisitions, and to really understand what they are buying and for what value – one of the issues with what has been an overheated market is that it can lead to ‘irrational’ behaviour and subsequent ‘buyer's regret’.
There is one recent example of a poorly conceived and executed buy-and-build strategy which has resulted in significant financial challenge and ensuing nursery closures. Thankfully, this is an exception as most of the established buyers we speak with are taking a considered approach to strategy and execution.