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Welcome to the Amazing, the podcast for acquisition entrepreneurs,

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search funders and how co builders across the UK and Europe.

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In this by slide breakdown segment,

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we roll up our sleeves and real life SMB listings,

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unpacking the numbers, servicing hidden risks and hunting for the upside.

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But you are lining up your very first offer

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or adding to the next bolt on for a growing hole.

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Co pull up a chair.

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This is why we stress test opportunities and listings into lessons.

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I am joined as ever by my captivating co-host, Gareth Hawkins,

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CEO of Biz Crunch, and serial acquirer.

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How are you, Gareth?

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good, thank you. I'm flattered.

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I'm not sure I'm that captivating, but you're very kind

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and how you could be this week.

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I think I'm very well.

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Well, we went for effervescent last time, so I'm just

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going to give you a different compliment. Every episode.

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I'm keeping my toes different.

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Yeah. Yes, I'm doing very well.

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Thank you.

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I'm excited for another by side breakdown.

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The last time we did it was our first episode, obviously,

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and it went really well.

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People seem to really enjoy it, so I'm excited for episode two

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as a lovely message is

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actually through LinkedIn and the likes from

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longtime listener first time caller

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were quite keen on the change of format.

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So yeah, let's see if we can keep a streak going.

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Absolutely.

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Well, before we dive into that, Gareth, can you kick us off with the news?

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Yeah, sure.

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Well, another busy week.

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Seems it will be happening in Spain at the moment.

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So is three news items about Spain that will be well run through.

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But target capital,

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which is a Spanish search fund led by Diego Canale is Delgado.

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And Nicolas Romo will tell

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close their search phase and their cap table is pretty impressive.

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You've got JP 46, Coco Capital, Ithaca.

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You've got Cabeus, a capital six venture capital Partners

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and a large number of high net worth individuals that are participated.

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So really nice to see Targus, another Spanish shirt fund getting off the ground.

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Lots to go at.

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Their thesis takes them all the way across southern Europe.

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So looking forward to hear which deals they take down over the next year or so.

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Congratulations Horgos.

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Well, my niece is also from Spain, so Lowry Partners,

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who are Spanish Aerospace and defense focused search fund,

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have a quite good smile who are precision machining company based in Barcelona.

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It sounds to me a lot like a vertical acquisition of a key supplier.

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Yeah, I think from looking at it could do quite a lot

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in the defense space, you know, very sensible to secure that supply chain,

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I think given where the world has unfortunately been heading.

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Yes, the less said on that, the better.

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It's quite tough, I'd say.

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Any more news.

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Yes. Sorry.

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No wistful laments about global politics.

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Yeah. Okay. Come back to message.

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Yeah, definitely is so something that's kept me interested

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This week is reading the latest edition of such Fun Squid from Moonbase Capital.

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It's my series, so we'll put a link to it in the show notes.

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But this time they focused on

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Konstantin Marek and Nicole Kaminski of Lynx Trail Capital,

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who are one of the leading pioneering search funds in Poland.

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The really interesting stuff in in their profile

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that I'd recommend to the listeners like reading.

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Very interesting.

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Yeah, we'll share that.

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And I actually haven't read

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any of the search on squids here, so I'll have to do some catching up.

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Yeah, better.

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Obviously good authority on this.

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They've invested in quite a lot.

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They've been really improving accessibility of search funds to investors

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and, you know, the commentary on certain funds that they have backed

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or that they've been looking at has been quite, quite enlightening.

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So yeah, good series.

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Keep it up, please. Moonbase.

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absolutely.

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Okay Well that is our news segment concluded

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Let's get into this week's buy side breakdown.

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So this week we're looking at a group of three

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freehold nurseries in the north west of England,

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I think nurseries.

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Yeah.

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I've in a previous conversation, I think with Charlie,

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Charlie Norton,

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and we were talking about how becoming new parents

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and putting your kids in nurseries makes you look at them very differently.

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But with a private equity and you can sort of see the attraction,

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but it's been a really busy space actually necessary roll ups over the last decade.

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There are some emojis in this space that have got prolific portfolios now.

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Yeah, I was really surprised, actually.

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We were talking about there's a list of the 25 largest nursery

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changed in the UK, so topping out is busy bees with 366

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nurseries, property Beta three busy bees have been busy bees

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buying up all of these sites, but they've had a slew

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of different private equity owners over the last couple of decades.

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But there are, you know, 1015 groups in the UK with 50

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plus nurseries under their belt, which is really impressive to me.

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And so going in the same direction, that sort of veterinary

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census did a decade ago, I guess exactly that.

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And I think whilst, you know, there was an element of dependency

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on kind of some of the government

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funding whims around this and obviously 2024 there was a change

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in policy to create more government funding entitlement

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for the younger the parents with younger children.

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And so so yeah, it has kind of been a bit of a catalyst

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I think, for the space, giving it a new lease of life.

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You've seen a number of additional deals being done recently and

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kindred nurseries who have

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invested in by living British, one of the private equity firms recently.

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They've been very acquisitive.

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I think they're going from something like 40 sites to 150 sites.

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So they've been very bold.

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You've got kids planet who are, I guess up there in that top five.

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Yeah.

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One of they own something like 150. 200.

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It's now 172 over 72.

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They are. Okay.

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So yeah, they're owned by Freeman Capital and Souter Investments

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and again, you know, it's it's all go for growth.

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You've got Bright Stars, which was obviously a product of innovation.

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Capital Partners recently bought by Oaktree Capital.

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They just keep on growing bright stars that go,

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wow, goodness me hundreds hundreds of sites now.

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So yeah, yeah.

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It's an interesting space grant They're the sort of French firm,

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I think it is a global acquirer of nurseries.

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I think they go in Frasier as being their their owner.

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They've, they've been very acquisitive in recent years in the UK.

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So yeah, it's, it's a great space.

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I'm sure

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a company like we're going to review now

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with three sites in a nice part of the country

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with some decent freehold it going to be in hot demand.

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So let's get into the fundamental shall we?

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We've obviously pulled some of their data from this crunch,

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having found this particular listing originally

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on business buyers.

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There's the agent, the broker here, business buyers, Skoda, UK.

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Yeah.

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Is it one of their affiliated entities that Redwoods.

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Yes. Redwoods down in Coeur. Yeah.

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Okay. Yeah.

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So they so they are specialists in this space.

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They do education and and medical I think

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brokering for business buyers but

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yeah okay so let's, let's dig into the, the listing shall we.

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What are we got.

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So off the bat

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we have no listed asking price

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a turnover of 1.263 million and adjusted EBITDA of 284.

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Okay.

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So capacity for 320 children.

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All three nurseries supported good by Ofsted

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and Reason for sale is a retiring vendor.

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The retiring owner again. Yes.

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Come on, come on.

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Thing we're coming up against and certainly a lot of that in this space.

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I was looking at nurseries for a client the other day

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and yes, there's a, there's a slew of them where the owners are sort of north

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of retirement.

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So yeah, that's really interesting.

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So what do we know about the asset value that isn't disclosed necessarily

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on the listing, but what is the what is the sort of the background on this?

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We think we've identified who this company is, right?

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Yes, we're fairly sure, but that does raise some questions.

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So obviously, this is listed as in the description.

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It says the nurseries operate from three freehold properties

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with expansive outdoor space and facilities.

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But we had

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some discussion back and forth whether this listing

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includes those properties or whether they are separate.

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Yeah, a note on Redwoods website, they actually list this

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as Manchester, whereas on business buyers they're listed as north west.

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So if we assume that one of those sites is in Manchester.

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Yes. Well, from the digging that we've done in the nursery

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chain, we believe that it is it looks like it kind of

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carries up with their three locations, one in the heart of Manchester,

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one just outside in a kind of sort of border suburb.

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And then one town a little further out or almost sort of on the same train line

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out to southwest Manchester, which is interesting,

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sort of going past the airport and the hospitals out there,

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which would make it areas which would you say, or.

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Yeah, I would say so.

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I would say that, you know, probably up and coming areas.

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I think we looked at ones even with insurer, which is sort of

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on the edge of Stockport and is on the way up and the Hartford is a

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lovely sort of suburban area.

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So crew direction, so very useful

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for commuters as well.

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There aren't enough to each other.

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Gail's bakery in

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I'm not sure I haven't spent enough time in those places.

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Or is it a Greggs.

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Which one. Which one are we talking here.

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Yeah Geils of Greggs is the yardstick of gentrification, isn't it?

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So probably.

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Probably Greggs, but Gail's on the way, I would say.

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nice.

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Okay, so there's a

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there's a potential upside there in terms of changing demographic.

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Yeah, well, I mean, look, Manchester has seen a massive influx in people

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moving up from the South.

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And I think what I've noticed since I've been here,

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So I am one of those people.

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Sorry, Manchester residents.

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What I've noticed quite a lot is people tend to come and live here

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and they tend to live in the sense of right on the edge of the city

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for the first year or so, and then they sort of graduate

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out into the smaller commuter towns because the public transport air is great.

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So we're starting to see areas like Wythenshawe that sprawl on the edge

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or even further out in Hartford,

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if people wanted to live on a train line but have a bit more of a countryside feel,

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they're starting to get more and more of that kind of drip feed of

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of commuters in Manchester, new residents.

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So gentrification follows, right?

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So what kind of properties do we feel these might be like at their freehold?

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Are we talking sort of like retail shop front locations or are we talking like

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port cabins or what are we talking about?

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Where where on the spectrum might these be?

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I'm well, I mean, for the central Manchester

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location, again, if this is the nursery that we believe

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that it is, it's right next to Manchester, Oxford Road Station. So

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it's very much high rise buildings around there.

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So I'd be surprised if you'd be really interested to see what

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they have in terms of outside space in such a busy area,

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very popular with students, lots of student accommodation.

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Yes. So that would be super busy, I think if you were out

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in kind of Hartford and even within shore,

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I think they'd have a bit more space there.

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I think they're probably a little bit more upmarket than a porter cabin.

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But yeah, this does kind of bring us back to the asset value

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because from what we've seen, I'd be surprised if the asset value listed for

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that company would cover three locations, including one in central

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Manchester, a

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I could be wrong.

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I was thinking the same actually.

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So from our analysis,

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looks like it's sort of worth 450 grand's worth of assets.

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Yeah.

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So you'd be hard push to get all of the fit out

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and the three sites onto that balance sheet.

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I think unless you were talking about very high ground likely in those locations.

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I note though that one of the directors

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and actually also owns a property separately.

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Yes, I'm well, I'm thinking

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maybe at least one of these locations might be part of that. CO

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If I was to

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hazard a guess, I would guess potentially the city center location

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and then the other two a part of the nursery.

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Now this is another 370 case worth of assets in that property.

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So collectively we're talking, you know, under K which, which might get

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you three sort of small sites for, you know, this number of kids.

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300 kids, right?

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Yeah, I think 800 K would cover it.

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Yeah.

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For those sites. 350 kids. Yeah.

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That 100 or so each.

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I think that, I think the 800 would cover it

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says most likely that those are broken up between those two.

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So what kind of a deal gets done here.

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I guess if it's freehold you've got the property deal being done

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alongside the operating it multiple piece,

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which from a financial perspective is pretty interesting because if you limit

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it more towards the former, you get slightly

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you know, you get mortgage, commercial mortgage terms on, on acquiring this.

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But what kind of multiple do we think gets paid

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for a nursery of this or nursery group of this size?

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I that's a great question.

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I mean, I'd probably wager

00:13:58:27 - 00:14:02:02
in the sort of 2.5 to 3.5 X range.

00:14:02:05 - 00:14:02:33
Yeah. Yeah.

00:14:02:33 - 00:14:05:08
So it's a fairly, fairly typical, fairly standard.

00:14:05:08 - 00:14:08:27
I guess what limits this possibly is capacity.

00:14:08:27 - 00:14:12:22
So like if it's 350 kids capacity currently, what's the utilization

00:14:12:22 - 00:14:18:04
of that capacity and what could be done to increase the,

00:14:18:11 - 00:14:21:04
you know, the yields that you'd get from each of these sites?

00:14:21:04 - 00:14:22:31
I note that they mentioned in their accounts

00:14:22:31 - 00:14:25:31
they've got 42 members of staff.

00:14:26:00 - 00:14:31:11
I guess there's going to be some shift work element to all of that. But

00:14:31:14 - 00:14:33:33
what can be done if you if you if you were to buy this,

00:14:33:33 - 00:14:37:07
you know, how much growth could you actually drive

00:14:37:10 - 00:14:39:10
and how would you go about driving that growth,

00:14:39:10 - 00:14:41:10
I guess, is the question, because that's going to influence

00:14:41:10 - 00:14:46:13
what on acquirer would be willing to pay is a multiple in terms of, you know,

00:14:46:16 - 00:14:47:12
do I get my money back?

00:14:47:12 - 00:14:52:07
And if so, how quickly and growth will will accelerate.

00:14:52:10 - 00:14:54:25
Yes. And look, you know,

00:14:54:25 - 00:14:58:18
on use heads on registration is what is why are you going to make your money?

00:14:58:18 - 00:14:59:26
You know, capacity is currency.

00:14:59:26 - 00:15:01:13
When it comes to a business like this.

00:15:01:13 - 00:15:04:13
They have spoken about room to expand.

00:15:04:16 - 00:15:08:04
But I would like to know if that's imagined room to expand

00:15:08:04 - 00:15:11:10
or whether there's planning permission for that or, you know, how set is that?

00:15:11:10 - 00:15:15:05
Is it just they have some room that you could put some additional space onto?

00:15:15:08 - 00:15:17:24
How far along in that process are they?

00:15:17:24 - 00:15:19:09
Because yeah, that's really where the growth comes from.

00:15:19:09 - 00:15:21:05
I mean, we talk about changing demographics

00:15:21:05 - 00:15:22:28
and that's something that I would dig into

00:15:22:28 - 00:15:26:01
if I was to go deeper down the rabbit hole in this business.

00:15:26:03 - 00:15:27:33
You know, look at where they are, look at what the changes are.

00:15:27:33 - 00:15:30:29
Could there be increases in prices there?

00:15:30:31 - 00:15:33:33
But really, you are always going to be limited by the number of heads

00:15:33:33 - 00:15:37:11
that you can fit in unless there are, you know, possibilities for expansion

00:15:37:11 - 00:15:41:33
into additional hours, you know, potentially so

00:15:42:02 - 00:15:44:33
holiday clubs and things like that.

00:15:44:33 - 00:15:47:06
But yeah, that's really where the limiting factor comes in.

00:15:47:06 - 00:15:50:31
So I would love to know what they mean by, you know, room to grow.

00:15:51:00 - 00:15:51:29
Yeah, likewise.

00:15:51:29 - 00:15:56:25
And what kind of CapEx is required in order to to to drive that expansion

00:15:56:28 - 00:16:00:14
because you've got a whole other ROI question then around, you know,

00:16:00:14 - 00:16:01:31
you're not just got the way of when I'm going

00:16:01:31 - 00:16:05:24
to get the initial acquisition capital back from the operations.

00:16:05:24 - 00:16:07:12
But if I'm going to expand the operations

00:16:07:12 - 00:16:10:04
and that's going to require me to put some CapEx in

00:16:10:07 - 00:16:13:07
and possibly I might be already, you know,

00:16:13:09 - 00:16:17:07
heavily leveraged in the deal structure that I end up doing and acquiring it.

00:16:17:09 - 00:16:19:13
Well,

00:16:19:13 - 00:16:22:13
how many years will I wait to get my money back for my for my expansion?

00:16:22:13 - 00:16:26:17
So, yeah, delicate consideration, lots of calculation required.

00:16:26:17 - 00:16:31:06
But as you say, it's going to be planning permission driven.

00:16:31:09 - 00:16:34:02
There's a staffing challenge if you're going to increase the capacity.

00:16:34:02 - 00:16:39:20
Obviously there's a statutory maximum number of kids you can have key carer

00:16:39:22 - 00:16:42:20
so that something is always worth thinking about.

00:16:42:20 - 00:16:45:26
And of course, you know, with an army of people in the,

00:16:45:27 - 00:16:48:06
in these sort of businesses comes additional overhead

00:16:48:06 - 00:16:50:12
in managing those people and you know, h.R.

00:16:50:12 - 00:16:51:06
Etc. as well.

00:16:51:06 - 00:16:55:29
So I wonder and I sort of hate the way that this is used

00:16:55:29 - 00:17:01:23
in private equity for nursery rollouts, but revenue per child

00:17:01:25 - 00:17:04:00
basis, not a bit because it doesn't sound great,

00:17:04:00 - 00:17:08:31
does it know as a parent, but not sure my my child to be assessed on revenue.

00:17:09:00 - 00:17:10:12
But yeah,

00:17:10:12 - 00:17:13:13
I wonder what that metric looks like in these kinds of locations,

00:17:13:13 - 00:17:14:29
whether there is a premium

00:17:14:29 - 00:17:18:06
and a good margin to be made on all that kind of cost to serve

00:17:18:09 - 00:17:22:24
or whether it is, you know, sort of a subsistence kind of exercise

00:17:22:24 - 00:17:24:09
and you don't end up doing it for the money,

00:17:24:09 - 00:17:27:14
you end up doing it for the for the mission, the social impacts,

00:17:27:14 - 00:17:31:11
if you will.

00:17:31:14 - 00:17:34:30
Yes. I mean, we obviously there is money to be made in this business.

00:17:34:30 - 00:17:37:01
Otherwise, you know, those numbers in this companies

00:17:37:01 - 00:17:40:01
that we were able off at the start, this wouldn't exist.

00:17:40:02 - 00:17:42:21
But then this was a question I was going to put to you.

00:17:42:21 - 00:17:46:31
I mean, is this something that someone should go into without prior knowledge?

00:17:46:31 - 00:17:49:11
I mean, is it something that you can pick up and run with?

00:17:49:11 - 00:17:51:08
And they talk about the fact they've got an experienced staff

00:17:51:08 - 00:17:54:08
and it could all be hands off, but, you know, things like,

00:17:54:15 - 00:17:57:15
you know, regulations and Ofsted and,

00:17:57:20 - 00:17:59:27
you know, the way that government influence affects it.

00:17:59:27 - 00:18:00:29
Like, is this something that you'd

00:18:00:29 - 00:18:04:28
really want to know going in in order to make the most of this?

00:18:04:31 - 00:18:07:11
Is this, is this something that a sector agnostic person could

00:18:07:11 - 00:18:09:03
pick up and run with?

00:18:09:06 - 00:18:12:10
I, I'd find that difficult to believe.

00:18:12:10 - 00:18:19:02
I think it's one of those related spaces with offset that,

00:18:19:05 - 00:18:23:11
you know, there are certain qualifications and accreditations etc.

00:18:23:11 - 00:18:27:15
that both the sites and the leadership would be expected to have.

00:18:27:18 - 00:18:30:27
So I mean, if they're all covered off and, you know, the team that's

00:18:30:27 - 00:18:34:28
there is the compliance, the governance piece that's required,

00:18:34:28 - 00:18:39:12
then then, yes, ostensibly.

00:18:39:15 - 00:18:41:22
But obviously you

00:18:41:22 - 00:18:42:31
don't want to dig up the past.

00:18:42:31 - 00:18:47:02
But there are some examples, if you like, in acquisition entrepreneurship,

00:18:47:02 - 00:18:51:06
where nurseries were acquired by people that weren't specialists

00:18:51:06 - 00:18:53:02
in this space and in.

00:18:53:02 - 00:18:56:23
Well, yes,

00:18:56:26 - 00:18:58:10
yeah, yeah.

00:18:58:10 - 00:19:01:14
I mean, I think I think it can be done if there's good management

00:19:01:14 - 00:19:02:18
and but I don't think it's something

00:19:02:18 - 00:19:05:28
you can just set and forget and like, you know, come back once a quarter

00:19:05:28 - 00:19:07:28
for a board meeting I feel about it's the sort of thing

00:19:07:28 - 00:19:11:17
that morally you're compelled to keep your hand on the tiller.

00:19:11:20 - 00:19:14:01
Well I also think, well, yeah, absolutely.

00:19:14:01 - 00:19:18:03
Morally, I think also you know, going back to what we were saying about offset

00:19:18:06 - 00:19:22:25
the fact that they have good Ofsted ratings across all three locations,

00:19:22:25 - 00:19:26:07
I think is an excellent thing because that shows that it's not a fluke,

00:19:26:09 - 00:19:28:17
that shows good management, it shows that they've got a good team

00:19:28:17 - 00:19:31:08
and that they know what they're doing. But good is good.

00:19:31:08 - 00:19:37:18
It's fairly generic, very mediocre records, outstanding is the goal.

00:19:37:21 - 00:19:39:28
It was just tough, tough to get and tough to keep.

00:19:39:28 - 00:19:44:04
But yeah, no, this is not the none of these sorts of deemed outstanding.

00:19:44:04 - 00:19:46:14
I think good. Yes.

00:19:46:14 - 00:19:50:10
But worth someone to come along and lose the good

00:19:50:10 - 00:19:51:22
rating on even one of those sites.

00:19:51:22 - 00:19:53:17
I reckon that would carry a bit off

00:19:53:17 - 00:19:57:08
faster than a rent hike which I think the multiples.

00:19:57:11 - 00:19:59:17
Yeah, absolutely.

00:19:59:17 - 00:20:03:05
Because you know, these things run on reputation so

00:20:03:08 - 00:20:05:25
maybe it is one for those with a bit of prior knowledge.

00:20:05:25 - 00:20:07:06
I mean, maybe not necessarily.

00:20:07:06 - 00:20:10:21
Yeah, I think they're probably necessarily in the childcare space actually.

00:20:10:24 - 00:20:13:15
I think there probably some transferable skills from some other sectors,

00:20:13:15 - 00:20:18:33
but for me I would be I would be nervous to take on something like this.

00:20:19:02 - 00:20:22:10
Yeah, I'm inclined to agree

00:20:22:13 - 00:20:23:16
there.

00:20:23:16 - 00:20:27:09
It's assuming you couldn't just say you couldn't in a short

00:20:27:09 - 00:20:31:02
space of time increase the capacity for this business.

00:20:31:05 - 00:20:33:01
How else could you increase the increase

00:20:33:01 - 00:20:34:30
the revenue or profitability of this business?

00:20:34:30 - 00:20:41:10
I mean, I wonder what the elasticity of pricing would be like in childcare.

00:20:41:12 - 00:20:45:04
I mean, speaking as a parent of pay through the nose to send

00:20:45:06 - 00:20:48:28
children to the nursery in the past,

00:20:48:30 - 00:20:52:18
it's yes, it sometimes requires a full time

00:20:52:18 - 00:20:55:18
income just to pay the childcare in certain locations.

00:20:55:22 - 00:20:58:04
But what

00:20:58:04 - 00:21:02:30
what do you think is the feasibility of being able to get a price

00:21:02:30 - 00:21:06:19
increase through on this kind of this kind of an asset?

00:21:06:21 - 00:21:10:19
I think it would be interesting to see where they're currently priced.

00:21:10:19 - 00:21:14:24
I think one of the kind of nuances of the location is

00:21:14:32 - 00:21:18:26
we are in a kind of flux in the Northwest where things are becoming more expensive

00:21:18:26 - 00:21:21:08
because of people like me that have moved here. Again, sorry.

00:21:21:08 - 00:21:25:15
Still, the Greater Manchester residents that hold me accountable for that.

00:21:25:18 - 00:21:28:06
So it may be that they are priced

00:21:28:09 - 00:21:29:25
to a kind of

00:21:29:25 - 00:21:32:25
previously low number and there could be some room for expansion there.

00:21:32:25 - 00:21:36:26
But then you wouldn't want to, you know,

00:21:36:28 - 00:21:39:29
you know, neglect the local community that that may be also struggling

00:21:39:30 - 00:21:41:00
to afford it as is.

00:21:41:00 - 00:21:43:08
So there might be some room to grow there.

00:21:43:08 - 00:21:44:10
I'm not sure.

00:21:44:10 - 00:21:48:06
I think potentially if you can't increase the capacity,

00:21:48:09 - 00:21:51:20
I think probably service diversification is the way to go.

00:21:51:20 - 00:21:56:08
So like I said, you know, maybe after school programs, holiday clubs,

00:21:56:10 - 00:21:58:28
specialized classes,

00:21:58:28 - 00:22:01:28
you know, what else could you do with the space

00:22:01:30 - 00:22:04:01
and increase maybe the hours rather

00:22:04:01 - 00:22:07:13
than if you can't increase the capacity or the pricing?

00:22:07:16 - 00:22:09:04
Yeah, good point.

00:22:09:04 - 00:22:12:04
Yes, it's a bit more by using the longer hours.

00:22:12:04 - 00:22:15:03
Yeah, I see the merit of that.

00:22:15:03 - 00:22:18:16
Also, all that sort of tiered structure in the market around different

00:22:18:21 - 00:22:19:24
types of model here.

00:22:19:24 - 00:22:21:12
Like I get the thing,

00:22:21:12 - 00:22:24:12
not everybody is charging the same price for the same product.

00:22:24:14 - 00:22:27:12
There's a there's a group called in Family Club

00:22:27:12 - 00:22:30:18
that's quite it's growing quite rapidly down here

00:22:30:18 - 00:22:35:18
in London where it's almost like putting your child

00:22:35:18 - 00:22:39:27
into a scandi styled

00:22:39:29 - 00:22:45:01
kind of Nordic coffee shop experience with

00:22:45:04 - 00:22:47:10
like very

00:22:47:10 - 00:22:50:26
curated programs of of kind of

00:22:50:29 - 00:22:54:12
Montessori esque sort of experiences for these kids

00:22:54:12 - 00:22:56:22
to kind of give them a head start, if you will,

00:22:56:22 - 00:22:59:22
if your plan is to send them to Eton or something.

00:22:59:29 - 00:23:01:32
But, but yeah, these guys

00:23:01:32 - 00:23:05:12
and family club charge significant premium.

00:23:05:12 - 00:23:07:23
This is like the sort of more generic competition,

00:23:07:23 - 00:23:09:01
but they have little things like,

00:23:09:01 - 00:23:12:20
you know, as a parent you can stay in co work for a bit after you've got to cater

00:23:12:21 - 00:23:16:05
or they'll provide you kind of coffee and Brussels, which they call free.

00:23:16:05 - 00:23:16:29
But I'm pretty sure

00:23:16:29 - 00:23:19:19
given you paid for the most of the fees, they're not really great.

00:23:19:19 - 00:23:24:18
But yeah, the reason I asked about the affluence of the areas

00:23:24:18 - 00:23:28:25
ultimately is because is there and means to kind of pivot in the model a bit like

00:23:28:28 - 00:23:32:07
take up market for a nursery or is it necessarily

00:23:32:07 - 00:23:35:16
just a nursery to the to the majority of people in these kind of places?

00:23:35:19 - 00:23:39:06
I mean, I think it would depend I'm not too knowledgeable on Hartford or within.

00:23:39:06 - 00:23:39:31
So I have to say

00:23:39:31 - 00:23:43:27
I do think it would be possible around the Manchester Oxford Road Nursery

00:23:43:27 - 00:23:47:16
and maybe they could use that as a as a as a test site for that because there are

00:23:47:20 - 00:23:47:33
you know,

00:23:47:33 - 00:23:50:13
we've had a huge influx of a lot of the challenge of banks

00:23:50:13 - 00:23:54:03
have said, now you know, you starlings and humans over and such and high paid

00:23:54:05 - 00:23:55:31
tech workers in and around the city.

00:23:55:31 - 00:23:59:11
I'm sure that something like what you've described might appeal to them.

00:23:59:11 - 00:24:03:19
So maybe they could use it as a test site for, for something along those lines.

00:24:03:21 - 00:24:05:26
If they do freehold, the building in that location

00:24:05:26 - 00:24:09:08
then would be a great place to kind of co work from.

00:24:09:11 - 00:24:12:15
So yeah, yeah, that could be, that could be a consideration.

00:24:12:15 - 00:24:15:05
It's, you know, and, and then, you know,

00:24:15:05 - 00:24:19:00
do you have pricing tiers to be treated like a SAS model.

00:24:19:03 - 00:24:24:26
I'd like my shout on platinum plus please

00:24:24:28 - 00:24:27:14
at least send them out ready for prep school or whatever it would be.

00:24:27:14 - 00:24:29:24
Yeah. Yeah, exactly. Yeah.

00:24:29:24 - 00:24:30:27
No that's not super.

00:24:30:27 - 00:24:32:06
I mean childcare is not something

00:24:32:06 - 00:24:34:20
that I know much about, so that is really interesting.

00:24:34:20 - 00:24:39:11
I can totally see that you could reposition yourself to be the kind of,

00:24:39:11 - 00:24:43:25
you know, future leader trainer of, of babies.

00:24:43:28 - 00:24:45:16
Yeah.

00:24:45:16 - 00:24:47:30
Basically in the fintech, you know, we only do fintech kids.

00:24:47:30 - 00:24:49:13
Yeah, I like that.

00:24:49:13 - 00:24:51:20
Yeah. Neobank customers only.

00:24:51:20 - 00:24:53:04
But no, in all seriousness, like,

00:24:53:04 - 00:24:55:13
there is always a risk, of course, when you change a model like that

00:24:55:13 - 00:24:58:30
that you would alienate your existing customer base before you are able

00:24:58:30 - 00:25:03:04
to plug the gap with the higher end customers that you want to attract.

00:25:03:07 - 00:25:05:08
Yeah, Yeah, absolutely.

00:25:05:08 - 00:25:05:26
Absolutely.

00:25:05:26 - 00:25:08:00
Well, I mean, this is another great point.

00:25:08:00 - 00:25:12:14
So if someone were to take this on and the freehold of the properties

00:25:12:14 - 00:25:15:22
is included, that does give you a good launchpad

00:25:15:22 - 00:25:20:17
to provide capital for a fourth location potentially.

00:25:20:20 - 00:25:21:25
So if you were to

00:25:21:25 - 00:25:24:09
want to try something new, that could be a way to do that

00:25:24:09 - 00:25:26:10
and that could be a way to expand capacity.

00:25:26:10 - 00:25:27:21
They already have a,

00:25:27:21 - 00:25:31:22
you know, reasonably well no name in the area with the three sites.

00:25:31:25 - 00:25:33:33
Would that be an option that you'd look at?

00:25:33:33 - 00:25:35:15
I think I'd most definitely would.

00:25:35:15 - 00:25:39:32
In fact, they probably already have kind of centralized back office h.r.

00:25:40:00 - 00:25:40:27
And i.t.

00:25:40:27 - 00:25:43:16
And you know, administration and that sort of stuff.

00:25:43:16 - 00:25:48:05
The maybe they're able to kind of amortize across a greater number of sites.

00:25:48:08 - 00:25:52:19
And I think the more sites you build out,

00:25:52:22 - 00:25:56:00
you know, from a common infrastructure, the more you know,

00:25:56:06 - 00:25:59:15
overall profitability you can drive because of that

00:25:59:18 - 00:26:03:01
duplication piece that shared central functions piece.

00:26:03:04 - 00:26:06:20
So yeah, I think that's really inspired that actually this potentially becomes

00:26:06:20 - 00:26:12:10
a bit of a platform and I actually within this country got a couple of acquisition

00:26:12:10 - 00:26:16:13
entrepreneurs that are actually actively looking, thinking about this now

00:26:16:16 - 00:26:21:26
to to find more platform companies in in education. So

00:26:21:28 - 00:26:24:28
yes, I think the growth here is not necessarily

00:26:24:30 - 00:26:27:12
bring more out of the existing sites

00:26:27:12 - 00:26:30:00
except for ring more back office functions

00:26:30:00 - 00:26:33:23
out of the HQ and can add on more sites

00:26:33:25 - 00:26:37:09
using all of the kind of the learnings

00:26:37:12 - 00:26:42:16
and the brand positioning and the systems and processes that you've got for three.

00:26:42:18 - 00:26:47:21
What what can you do that for six or nine or whatever over a period of a few years?

00:26:47:21 - 00:26:51:06
So see, I think maybe that's the better use of capital

00:26:51:09 - 00:26:54:15
in getting a foothold in other local

00:26:54:15 - 00:26:58:03
markets around where the brand is is considered strong.

00:26:58:06 - 00:27:00:19
Yeah, yeah. That makes sense.

00:27:00:19 - 00:27:02:27
Going back to that, actually talking about the back office stuff,

00:27:02:27 - 00:27:06:03
one of the things that I thought was it was a positive from this listing

00:27:06:03 - 00:27:09:12
is that they do have what seems to be a solid sort of back

00:27:09:12 - 00:27:14:05
office team and they do talk about it being sort of fairly

00:27:14:07 - 00:27:15:28
management free.

00:27:15:28 - 00:27:18:16
I think that's the exact time they use professional management in place of

00:27:18:16 - 00:27:22:20
kind of owner non-operational, which I think is great.

00:27:22:20 - 00:27:23:28
And I think that for this particular

00:27:23:28 - 00:27:27:01
industry, staff turnover can be high and they do talk a lot about that.

00:27:27:01 - 00:27:29:01
They have good retention of good staff.

00:27:29:01 - 00:27:32:31
I think that's a positive and it would probably help you attract new staff.

00:27:33:00 - 00:27:35:03
I would potentially.

00:27:35:03 - 00:27:37:21
I think I read somewhere that they've got some some members of staff

00:27:37:21 - 00:27:41:05
that've been there for over 12 years, which I think is

00:27:41:07 - 00:27:43:05
excellent, but I think 12 year veterans

00:27:43:05 - 00:27:46:11
can come within a sort of invisible redundancy tab.

00:27:46:11 - 00:27:48:33
So it'd be interesting to know that number.

00:27:48:33 - 00:27:53:07
I think in a again, a high turnover sort of space, taking on a business,

00:27:53:09 - 00:27:59:17
being a new owner of a company with lots of long running staff might be a risk.

00:27:59:20 - 00:28:01:16
Yeah, it could be.

00:28:01:16 - 00:28:05:03
I mean, look, it's a sort of exercise you go through with any acquisition.

00:28:05:03 - 00:28:08:04
As you look at those ten years, there's the services you work out,

00:28:08:04 - 00:28:12:23
what your exposure liability would be, and nobody, every acquirer should be

00:28:12:23 - 00:28:15:29
mindful of transfer, of undertaking perfect protection of employment.

00:28:16:01 - 00:28:19:13
And you can't really go in and make swingeing cuts.

00:28:19:16 - 00:28:21:20
You know, people are entitled to some continuity

00:28:21:20 - 00:28:23:03
when you acquire the businesses.

00:28:23:03 - 00:28:23:19
Absolutely.

00:28:23:19 - 00:28:26:19
But similarly, you would quantify, you know, what

00:28:26:21 - 00:28:29:10
if, if a redundancy process was necessary,

00:28:29:10 - 00:28:33:27
where the total extent of your liabilities are, if there's anything contractual

00:28:33:27 - 00:28:39:02
that entitles the staff to more than statutory redundancy and

00:28:39:05 - 00:28:39:33
then work out

00:28:39:33 - 00:28:42:32
exactly what it would you say you want me to cut 20% of your headcount?

00:28:42:32 - 00:28:45:33
Why would that look like in terms of the total cost liability

00:28:45:33 - 00:28:49:20
to the business to pay them often and and and getting on

00:28:49:23 - 00:28:53:02
not somebody necessarily ever really want to have to do.

00:28:53:02 - 00:28:57:00
But no, you have to have a contingency plan, you know, plan for the

00:28:57:03 - 00:28:57:23
hope for the best

00:28:57:23 - 00:29:00:28
time for the worst I think is let me say I think that's the thing.

00:29:00:28 - 00:29:02:26
That's the saying.

00:29:02:26 - 00:29:06:24
And is there anything in particular that you would be looking for

00:29:06:24 - 00:29:10:14
in the due diligence process for a company like this?

00:29:10:17 - 00:29:12:18
Yeah, I'd want to be checking policies.

00:29:12:18 - 00:29:13:29
I want to be checking.

00:29:13:29 - 00:29:17:09
I want to see the Ofsted report, which you can obviously do publicly

00:29:17:11 - 00:29:21:00
when they last assessed if, if that goes back

00:29:21:03 - 00:29:24:30
because there was a backlog period around COVID where, you know,

00:29:24:33 - 00:29:27:21
educational establishments just weren't assessed and

00:29:27:21 - 00:29:30:24
they just got to keep their accreditation,

00:29:30:24 - 00:29:34:25
that's their level of award for longer.

00:29:34:28 - 00:29:38:18
And so if that's if they still haven't been around for another cycle,

00:29:38:19 - 00:29:42:05
how can I be sure that this is still a good nursery, for example?

00:29:42:05 - 00:29:45:30
So if that was recent, I'd have more, more confidence.

00:29:45:33 - 00:29:49:28
Not anybody really wants to ever enlisted inspection, but

00:29:49:31 - 00:29:51:16
but you would probably want one to be done in

00:29:51:16 - 00:29:55:03
the recent past is is really what I'm saying I'd want to see obviously

00:29:55:03 - 00:29:59:29
employment contracts tenure and service org charts, those kind of things

00:29:59:32 - 00:30:03:09
insurances accreditations to any of the particular

00:30:03:09 - 00:30:09:15
like large groups which I mean like the industry associations

00:30:09:17 - 00:30:11:10
training records.

00:30:11:10 - 00:30:13:19
Yeah. There's quite a human centric business isn't it?

00:30:13:19 - 00:30:14:10
You know,

00:30:14:10 - 00:30:18:05
these are tiny humans who are in the hands of the bigger, more experienced humans,

00:30:18:08 - 00:30:21:32
and they're the ones that can give you a liability or otherwise.

00:30:21:32 - 00:30:25:14
But I'd like to look at some of the recordkeeping

00:30:25:17 - 00:30:28:28
you know, maybe accident logs, because they'll all be keeping

00:30:28:28 - 00:30:33:27
some high level meetings around about accidents.

00:30:33:29 - 00:30:36:03
Yeah,

00:30:36:03 - 00:30:36:27
those kind of things.

00:30:36:27 - 00:30:41:21
In addition to the kind of quality of earnings, what do they do by way of

00:30:41:24 - 00:30:42:32
of payments?

00:30:42:32 - 00:30:46:19
Do they do they charge people, you know, X number of months upfront

00:30:46:19 - 00:30:50:13
or is it is it all just monthly in arrears?

00:30:50:16 - 00:30:54:22
What is that kind of invoicing policy?

00:30:54:24 - 00:30:57:23
Yeah, that's pretty standard fare.

00:30:57:23 - 00:30:59:23
So yeah, it's this

00:30:59:23 - 00:31:03:20
simple due diligence you can probably do with businesses like this, but

00:31:03:22 - 00:31:05:28
I think the trick is not not to rock the boat too much

00:31:05:28 - 00:31:10:13
because they're obviously doing well, doing what they do.

00:31:10:16 - 00:31:13:16
You want to keep them functioning optimal

00:31:13:23 - 00:31:16:19
and use that as a platform I think to build on.

00:31:16:19 - 00:31:17:11
I totally agree.

00:31:17:11 - 00:31:19:24
I think the only thing I would add to that is I would want to

00:31:19:24 - 00:31:23:06
I mean, you do this by course anyway, but a real solid property

00:31:23:06 - 00:31:26:15
appraisal of those three locations because if there is any,

00:31:26:17 - 00:31:28:27
you know, deferred maintenance or anything to be done, like you

00:31:28:27 - 00:31:31:21
said, you are interested in the care of these little humans.

00:31:31:21 - 00:31:34:32
And I think that this is a super important thing to look into So.

00:31:35:00 - 00:31:38:15
Well, to that end, do you want the property like there's

00:31:38:15 - 00:31:39:15
another thing here that could

00:31:39:15 - 00:31:44:07
could you carve out the opcoes here and just buy the cash generating assets,

00:31:44:09 - 00:31:48:15
have the owner keep the property in the pension fund or in their prop CO

00:31:48:17 - 00:31:50:31
and charges or rent, you know, give us a renewed lease

00:31:50:31 - 00:31:53:33
for the next ten years or something on each of the sites.

00:31:53:33 - 00:31:59:06
And then at least we've got an IBEX that is, you know, part of the cost of,

00:31:59:08 - 00:32:03:11
you know, quite the overheads in serving this day to day revenue

00:32:03:14 - 00:32:06:14
without necessarily having all the capital

00:32:06:16 - 00:32:09:15
obligations that you have as being a landlord as well.

00:32:09:15 - 00:32:12:06
So I wonder if there's a deal that's more

00:32:12:06 - 00:32:15:11
affordably to be done if someone didn't want to take on a commercial mortgage.

00:32:15:11 - 00:32:21:28
And that to me is just by the Echo Facebook.

00:32:21:31 - 00:32:22:18
Okay.

00:32:22:18 - 00:32:25:09
So I guess we've got to get to decision time. Really.

00:32:25:09 - 00:32:27:25
I think if it were if it were your money, what would you do?

00:32:27:25 - 00:32:31:33
So we get to buy and buy or pass, and this is an interesting one.

00:32:31:33 - 00:32:35:11
So in the hypothetical, if I knew what I was doing with that,

00:32:35:14 - 00:32:37:30
with nurseries, I think it's one that I would look into.

00:32:37:30 - 00:32:40:17
I think I'd go for buy. I think it's in a really great location.

00:32:40:17 - 00:32:44:17
I think there are some possibilities for expansion maybe.

00:32:44:20 - 00:32:48:12
I think the area is on up, lots of new houses being built.

00:32:48:15 - 00:32:52:16
I really like the idea of the SAS model training the next leadership baby.

00:32:52:16 - 00:32:57:03
So yeah, if I if I knew what I was doing, I think I'd go buy for this one.

00:32:57:06 - 00:32:59:20
How about you?

00:32:59:23 - 00:33:01:19
Well,

00:33:01:19 - 00:33:03:28
I have a list

00:33:03:28 - 00:33:04:31
to never work with.

00:33:04:31 - 00:33:07:04
Animals,

00:33:07:04 - 00:33:10:22
universities

00:33:10:25 - 00:33:12:28
or children.

00:33:12:28 - 00:33:15:24
So, yeah, I.

00:33:15:24 - 00:33:18:15
I might be having to break my own rules if I.

00:33:18:15 - 00:33:21:33
If I went down this road that.

00:33:22:02 - 00:33:24:29
Yeah, I, I'm in split minds.

00:33:24:29 - 00:33:30:00
I kind of like the profitability, I kind of like just at that sort of size

00:33:30:07 - 00:33:33:32
where you could throw some more on there and build it out into a little group

00:33:33:32 - 00:33:37:15
and start using it as a as a platform to go and do some walk ins.

00:33:37:15 - 00:33:41:28
And I'm a mini grand day or a mini busy bees or whatever.

00:33:41:31 - 00:33:44:20
But I do look obviously at some of these roll ups

00:33:44:20 - 00:33:47:26
and think, yeah, there's some decent returns there.

00:33:47:29 - 00:33:51:08
So yeah, I probably support you.

00:33:51:11 - 00:33:53:24
I would vote

00:33:53:27 - 00:33:54:26
for it.

00:33:54:26 - 00:33:55:30
Wow. Well, there we go.

00:33:55:30 - 00:33:58:00
It's our first

00:33:58:00 - 00:33:59:29
our first unified vote.

00:33:59:29 - 00:34:03:07
We're going to buy this rather than just the first consensus.

00:34:03:07 - 00:34:04:21
That's the word I was grasping for.

00:34:04:21 - 00:34:07:17
Missing consensus. Yep. Excellent.

00:34:07:17 - 00:34:09:09
awesome. Well,

00:34:09:09 - 00:34:10:07
anybody listening?

00:34:10:07 - 00:34:11:25
Please let us know what you think.

00:34:11:25 - 00:34:15:14
We'd love to know if you would buy or pass on this.

00:34:15:16 - 00:34:19:00
And if you are somebody that's looking for a nursery, then let us know.

00:34:19:01 - 00:34:21:11
Maybe we can help put you in touch.

00:34:21:11 - 00:34:23:16
Yeah, absolutely.

00:34:23:16 - 00:34:25:20
So cool.

00:34:25:20 - 00:34:29:08
Next, we have we have we have an interview next week

00:34:29:08 - 00:34:31:11
with another successful searcher

00:34:31:11 - 00:34:33:03
that's got a couple of deals done in recent months.

00:34:33:03 - 00:34:36:21
So very much looking forward to that.

00:34:36:23 - 00:34:40:13
We continue to put the finishing touches to the symposium.

00:34:40:16 - 00:34:45:00
Love to get more folks aware of that and

00:34:45:03 - 00:34:46:32
the tickets are still available.

00:34:46:32 - 00:34:50:08
That's on the 18th of June taking place in central London.

00:34:50:10 - 00:34:54:05
Visit serial acquirer Dot UK for your day pass.

00:34:54:08 - 00:34:57:33
We've added a couple of sponsors recently so

00:34:58:02 - 00:35:02:07
yeah it's looking like a decent event.

00:35:02:09 - 00:35:04:22
What else

00:35:04:22 - 00:35:06:17
as always

00:35:06:17 - 00:35:09:20
keep up to date with new features coming on Biz Crunch.

00:35:09:22 - 00:35:11:24
Obviously recently we launched our outreach.

00:35:11:24 - 00:35:14:24
We are the first platform to allow you to go into and

00:35:14:25 - 00:35:16:21
to find an outreach to customers on the platform.

00:35:16:21 - 00:35:19:30
We've got some more exciting features coming out very soon,

00:35:19:32 - 00:35:22:17
so stay tuned for all of that too.

00:35:22:17 - 00:35:23:19
Magic Yeah, exactly.

00:35:23:19 - 00:35:25:28
So exciting period ahead.

00:35:25:28 - 00:35:27:23
Thanks, everyone for listening.

00:35:27:23 - 00:35:31:17
Love to hear your comments and and thoughts on this deal below.

00:35:31:20 - 00:35:32:24
And we'll see you next week.

00:35:32:24 - 00:35:35:14
Until then, keep on crunching. Keep on crunching.