The early childhood education market has experienced an unprecedented disruption resulting from the COVID-19 pandemic. Nationwide lockdowns and stay at home orders disrupted the country and led to the closure of many businesses. Early education business were among the hardest hit initially. With many states mandating school and other business closings across the board, early education and childcare businesses faced difficulties maintaining operations. According to a 2020 poll by the National Association for the Education of Young Children, only 11% of programs were confident that they could survive a closure without outside financial support.

While the business environment for early education providers was challenging in 2020, there is reason to be optimistic going forward. Many in the preschool industry have bounced back from the pandemic and are experiencing tailwinds for growth moving into 2021. With a mass vaccine distribution campaign underway and comprehensive business closing orders winding down, 2021 represents a comeback year for many in the industry. Because the industry has long had sound fundamental tailwinds, early education continues to generate significant interest among both financial and strategic buyers, based on our first-hand discussions with institutional investors. 

Founders has a unique perspective on the M&A market for early education companies because of our recent experience with U-GRO Learning Centres, a 14-location company in Pennsylvania, which joined the Learning Care Group family of brands in December 2020. Founders had the opportunity to get valuation feedback from buyers both before and after the pandemic. Our experience indicates quality companies will continue to attract strong valuations post-COVID; we do not see M&A slowing down for the early education industry. In fact, many buyers we know are willing to value companies based on forward-looking projections without discounting valuations based on 2020 performance.

If you have questions about the value of your early education company, or would like to better understand your options for seeking growth capital or realizing a liquidity event, our team of advisors will be glad to connect with you. Please reach out to Mike McCraw, Managing Director, at mmccraw@foundersib.com.