A Bankers Perspective – securing funding for growth

Setting the Scene

• Nursery Sector remains highly fragmented.

• 2014 has already seen large a number of transactions which have involved consolidation in the Sector.

• Most nursery businesses remained resilient in the economic downturn.

• Sector is generally viewed positively by both investors and lenders.

• Positive economic outlook

Character of the existing business – internal analysis Management

• Track record

• Blend of skills/ succession planning.

Structure and systems

• Head office support or management on site?

• How is performance analysed internally?

• What skills are outsourced?

Culture

• Management style

• How satisfied are your employees?

• Good childcare above profit?

3 | Barclays presentation title | 30 January 2012

Character of the existing business – external analysisTrading activity

• Evidence that your business is reputable and sustainable.

Financial: Management accounts, audited accounts, KPI’s.

Operational: Ofsted reports.

Industry outlook/competitive positioning

• Historic impact of downturn.

• Government policy/support.

• Regulatory changes

• Existing supply in relevant areas.

• Fee rates/Ofsted ratings vs key competitors.

• Why would a parent choose your nursery?

4 | Barclays presentation title | 30 January 2012

Position the opportunity with your bank

Key areas to cover:

• Is it an acquisition, a new development, or an extension?

• How does this opportunity compliment your existing settings?

• Track record/reputation of target?

• Source of introduction to the opportunity?

• Rationale for sale of target

• Projected costs/purchase price & proposed funding sources.

• How does the opportunity fit into your wider strategy?

Financial analysis

• Focus areas for your bank will include:

• How your financials/KPI’s benchmark against your peer group.

• Trend analysis over the past three years.

• Forecasts and assumptions underpinning these.

• Sensitivities.

• Free cash flow analysis.

• Ability to repay.

• Accounting policies

• Breakeven analysis.

6 | Barclays presentation title | 30 January 2012

Integration plan – share it with your Bank!

Key areas to cover:

• How do you intend to integrate the company?

• Have you developed a 100 day plan?

• Operational assumptions?

• How will progress be monitored?

• Is any extra resource being taken on for the integration process?

7 | Barclays presentation title | 30 January 2012

Due Diligence Valuation

Has the vendor prepared a valuation that could be shared with the Bank?

Valuation addressed to the Bank will also be required.

Financial

Appropriate for larger M&A transactions.

Independent review of information supplied by vendors.

Highlights key risk factors/red flags.

Sensitivities

Legal

Highlight key legal risks.

Corporate structure/legal title to property.

Employment matters

8 | Barclays presentation title | 30 January 2012

Debt quantum • Your Bank will typically consider the

following factors:

• Size/profitability of your business

• Value of freehold assets

• Availability of the assets as security.

• Level/sustainability of cash flow

• Company’s ability to scale

• Company value

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And finally – some other tips to keep your Bankhappy

• Offer to take your Bank manager to visit your nurseries

• Provide your Bank with regular and clear management accounts.

• Prioritise good childcare over profit

• Regular dialogue/communication.

• Be transparent

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