John O’Gara, Director at Sentio Partners, shares what he’s seeing across the early years childcare sector right now. From the factors shaping buyer appetite to what they could mean for owners considering their next move.
Consolidation has been a defining feature of the market for several years now, driven by private equity buy-and-build strategies, expanded government funding and acute cost and staffing pressures. Large corporates remain active across all regions, with the likes of Kids Planet moving past 300 settings, including a first move into Ireland. But activity is no longer confined to the large corporates. We’re seeing more balanced activity across the whole market, with an increase in transactions involving independent providers, growing regional operators and first-time buyers.
While the case for consolidation remains strong, two developments this year will sustain M&A activity.
The first is cost. The 2025 National Insurance changes continue to challenge the nursery cost base, an issue compounded by further increases in National Minimum Wage, business rates revelations, and government funding still falls short of what it costs to deliver a place. Nurseries are used to plugging some of that gap with charges for extras, but the DfE’s updated guidance has tightened what providers can charge on top of funded hours, and councils are actively policing it, with the power to withhold or claw back funding from those who get it wrong. That removes an important lever independent operators use to manage their margin.
The second is Ofsted. The new framework moves to a four-year inspection cycle, brings first inspections forward to within 12 to 18 months of registration, and puts more weight on leadership and governance. For a well-resourced group with an established central team, that’s manageable. For a single setting run by an owner-operator, it’s a much bigger ask, and the risk of a poor outcome is higher.
Put those together and the case for scale gets stronger. Bigger groups can absorb the cost pressure and invest in the governance Ofsted now expects. Independents can still compete, but the gap between what running a nursery well now requires, and what an independent operator can manage alone, is widening.
None of this means independents are out of options, in fact it’s quite the opposite. Demand for well-run settings is as broad as we’ve seen it, competitive processes are lifting values, and sentiment surveys suggest many operators are already weighing a purchase or sale this year.
The owners who tend to do best are the ones who plan early and understand what their business is worth, and to whom, before they need the answer. — John O’Gara, Director, Sentio Partners
If you’re considering your next move in the early years childcare sector, speak to John and the team about what we’re seeing in the market and what it could mean for you.
