ADVICE
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BUYERS
WHO SELLS INDEPENDENT SCHOOLS AND NURSERIES?
- Private individuals who wish to retire, change course, trade up or sell for personal reasons.
- Educational companies backed by venture capital who have increased profits by any means available and want to take profits.
- Family-owned companies who wish to rationalise, alter their geographical profile or sell up for a variety of reasons. Many of these prefer to be absorbed by a trust or another family or individual owner who may be sympathetic to their ethos.
- Charitable Trusts when one of their schools no longer fits the picture or needs significant new investment of energy and talent.
HOW LONG DO SALES OF EDUCATIONAL BUSINESSES NORMALLY TAKE?
The word ‘normally’ does not apply to this sector. Most completions take place at
1. August 31st before the new academic year.
2. Just before Christmas and the New Year.
Groups or large businesses for investment or development.
We have good relationships with the major educational groups. We also have well-established contacts with venture capital firms and investors. If you want to consider a major acquisition or disposal in this field, we shall be happy to discuss this in total confidence.
Advice on funding
We are happy to advise you in general terms on ways of funding acquisitions and what is possible.
We have a number of financial contacts who are generally able to secure funding for educational businesses on terms which would make your average lender blush!
Advice on the legal process
Our own sole practitioner solicitor of many years’ standing is experienced in handling school and nursery transfers. He is courteous and good on detail. We are happy to recommend him.
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SELLERS
Selling your educational business can be a stressful undertaking. However, problems and timescales can be reduced by careful preparation.
Issues that should be checked and verified for validity are:
1. Documentation
a) Do staff contracts or subsequent letters of notification reflect current terms of employment?
b) Are current job descriptions clearly set out?
c) Are all your maintenance contracts (for computers, photocopiers etc.) up to date?
d) Are all necessary fire and fire equipment certificates up to date?
e) Are all necessary leasing arrangement documents easily to hand?
f) i) Is the most up to date copy of your property lease readily available?
OR
ii) Do you have a recent valuation of the freehold or details of similar properties as price comparables? Do you have the deeds to hand: have you looked at the covenants?
g) Are there any informal, undocumented agreements in place with third parties?
2. Registration and Accreditation
a) Is your accreditation documentation up to date and does other relevant paperwork reflect your accreditation status?
b) Is your business registered correctly as required under the Data Protection Act?
3. Inventory of items to be included in sale.
4. Inventory of items to be excluded from sale
The facts
A leading financial analyst, quoted in the Sunday Times, estimates that the standard of preparation for sale can make a difference of 25% to the price achieved for a business. It also affects the time it will take to sell your business.
'The vast majority of people selling don't plan and think ahead,' he says. 'With the help of their accountant they are keeping the taxable profit as low as they can, forgetting that this is the exact opposite of what they should be doing to prepare the business for sale. Their accounts are often not up to date and there could be a rent review outstanding.'
'… As well as timing, tactics are crucial. Mishandling the secrecy of the sale, for example, can ruin everything. One vendor saw a buyer for his business withdraw when staff walked out after they discovered he had lied about trying to sell the business.'
In other words, to give STC only part of the picture or to withhold crucial facts will damage your own settlement price and may easily lose a sale. If STC's answer to a specific question can only be 'Umm …' it will not help your cause!
If there is a flaw in your business (and what business doesn't have a flaw?) it is far wiser to put it right before offering it for sale – or even to admit it – than to hope it may not be discovered: it almost certainly will be and then all credibility is lost.
The feel
It has been estimated that the sale of a house is decided within 7 seconds of the front door being opened.
And Oscar Wilde said 'Only a fool doesn't judge by first impressions'.
The fact is, buying a business is every bit as emotional as buying a house.
The physical appearance of your business – its front door, security, cleanliness, decoration, welcome, smell – all these elements are every bit as crucial to a sale as the figures.
Buyers either feel a business is right – or they don't. Once they have decided it is almost impossible to shift their opinion.
STC 's 'Bit'
Nobody is better qualified than STC to introduce you to good quality, serious buyers whose brief matches your business. We will negotiate effectively on your behalf and use our long experience to assemble a small number of people - all of whom should be more than likely to buy your business - and set up a competitive race to buy. We can also introduce buyers to funders who are offering competitive finance specifically for educational businesses. We can offer our best advice and explain what buyers and their funders will need to see.
Your 'Bit'
But what we can't do is prepare your business for sale. Only YOU can make sure that the quality and quantity of information you entrust to us – your confidential agents – is as accurate and comprehensive as it can be.
And that your business looks and feels good for those crucial first few minutes.
Reasons why STC are the best people to sell your educational business
1. No lock-in period. Lock-in periods benefit only the agent, not you. Surely if you're not satisfied with the service you're getting you should be able to stop using it right away? (Subject, of course, to honouring existing introductions.)
2. No upfront fees and costs. There shouldn't be. After all, why should you pay something when you've had nothing? Upfront costs lock you in emotionally and, worse, take away the agent's incentive to get on with the sale. Your agent should be confident their marketing costs will bring results for you – and them.
3. We are true specialists. We don't sell lots of other things such as houses and general businesses in unrelated sectors. Obviously, an agent who concentrates all their efforts on just one sector is more likely to give you authoritative advice and accurate pricing and timing. They're also likely to have more successful relationships with the important buyers – and that can be crucial.
4. The people who visit your business will be the people who sell it. Because if the person who values your business has nothing to do with selling it, how can the buyers possibly get answers on basic questions such as the quality of staff, standard of facilities, atmosphere, general environment, traffic and so forth? Buyers want to chat to people who actually know what they're talking about so they can get a flavour of the business before devoting precious free time to making a trip.
5. We are really confidential. You will be able to see details of every single buyer – and discuss them – before deciding yourself who will see details of your business – and who won't. If Identifying details of your business are sent out without your approval, there's a good chance that sensitive information will reach the hands of your competitors. And who knows what they may do with it? If news gets out that you're selling your business it can only cause damage to your business, your staff relations and your sale. Don't let anyone persuade you that confidentiality does not really matter.
6. We have been selling educational businesses personally since 1986. This is longer than anyone else of whom we are aware.
7. We are the only people acting as agents in this specialised sector who have owned and run a successful educational business of our own for over 20 years; a day nursery and a primary/preparatory school in Kent.
8. We sell more nurseries and schools than anyone else.
9. We are honest. We don’t ‘overprice’ businesses or make promises we don’t intend to keep.
10. We make no charge for details, prospectuses, advertising or personal visits. We charge as little as 3% + VAT payable only upon completion of a sale.
11. We are well known to most of the major educational associations who speak well of us. Our advertising appears in all the relevant educational publications on a regular basis.
12. Each month around 5,000 people access our website and we get many calls daily referring to businesses seen on this site.
13. We work blooming hard!
We require sole agency as we are confidential educational brokers. We are very experienced and careful at protecting our vendors’ identity and do not relish the idea of our reputation being damaged by someone else’s indiscretion. Also, as you will appreciate, at a low commission for such a specialist business, multiple agency would not make sense.
Advice on the Legal Process
Our own sole practitioner solicitor of many years’ standing is experienced in handling school and nursery transfers. He is courteous and good on detail. We are happy to recommend him.
In many instances, it is wise to use a solicitor out of your area for the sake of discretion, especially if you are selling your business.
WHO BUYS INDEPENDENT SCHOOLS AND NURSERIES?
- Private individuals with money to invest and an interest or past experience in education. These are usually investments for the long term.
- Educational companies backed by venture capital. These are usually investing for the short term (less than 5 years) and pay the lowest prices – often adjusted by direct negotiation with the client at the eleventh hour.
- Family-owned educational companies. These are usually investing for the indefinite future.
- Charitable Trusts. These will nurture and support a school for the indefinite future.
HOW LONG DO SALES OF EDUCATIONAL BUSINESSES NORMALLY TAKE?
The word ‘normally’ does not apply to this sector. Most completions take place at
1. August 31st before the new academic year.
2. Just before Christmas and the New Year.
Groups or large businesses for investment or development.
We have good relationships with the major educational groups. We also have well-established contacts with venture capital firms and investors. If you want to consider a major acquisition or disposal in this field, we shall be happy to discuss this in total confidence.
Why it is so important that all matters to do with school sales are handled with the greatest discretion … and through STC.
Some cautionary tales.
1. A School owner in the Midlands made personal enquiries about planning for development. The news leaked and within six months the school – which had been trading healthily – had to close.
2. A school which was not doing well decided it was best to close down. The owners - honourably - decided to give the parents and staff three terms’ notice of the closure. Result: the parents immediately deserted to other schools. Almost all the pupils had gone before the end of the first term. The owners found themselves committed to paying all their staff for a full year.
Lesson. Advice from STC can help vendors avoid disasters such as these.
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Useful Links
The Independent Schools Association http://www.isaschools.org.uk/
National Day Nurseries Association http://www.ndna.org.uk
Independent Schools Council (ISC) http://www.isc.co.uk
Nursery World Magazine http://www.nurseryworld.co.uk
Incorporated Association of Preparatory Schools http://www.iaps.org.uk
dot 2 dot Nursery Insurance http://www.dot-2-dot.org.uk
Association of Governing Bodies of Independent Schools http://www.agbis.org.uk/publications.htm
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