Single-Site Childcare Business and Real Estate Sold in Wisconsin
HINGE Brokers is pleased to announce the January transaction closing of a single-site childcare business including the real estate in a suburb of Madison, Wisconsin.
This particular project was one of the more interesting ones that HINGE has had the pleasure of working on in the last several years because…
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the school had operated for 45 years under the same family;
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the facility consisted of three interconnected buildings with a fabulous natural outdoor play yard;
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the market was small in a non-Sun Belt location;
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and the school had a mixture of Montessori, traditional and Pre-K curriculum.
After the initial client meeting, HINGE recommended several enhancements to the facility to improve its appearance and function to customers, staff and prospective buyers. These changes included new lighting, flooring, paint options and arrangement of educational materials (mostly de-cluttering). To our pleasant surprise, the seller agreed to implement all these changes and commented that it gave the center a fresh new look and energized the staff culture.
During the marketing period, we had several interested parties take tours and express interest, but the single site offering failed to draw much attention outside of the Wisconsin market. There were already three national operators in close proximity and the seller preferred not to sell to one of those; it was doubtful that they would be interested due to proximity issues anyway.
We had several false hopes during the long marketing period. Thankfully, the seller kept focused on operating the business as best as possible even while the property was secretly up for sale. Gross revenue and profit increased moderately and we made a conscious decision to keep the pricing constant.
Finally, after vetting and rejecting many prospects, and getting rejected by others who didn’t like the location, the curriculum or the real estate, HINGE was able to identify a local buyer who had sufficient resources to pull it off.
Partway through the process, the seller confided in the Director about the sale and this proved to be a wise decision albeit risky. The Director not only kept quiet but was instrumental throughout the process as the eventual Buyer required the Director to stay on board (and she wanted to stay). HINGE flew out to Wisconsin at key moments to conduct face-to-face meetings and keep the process on track, as there were many opportunities for the deal to fall apart. There were challenges with the SBA financing, licensing and the attorneys involved; and after almost 2 ½ years, the transaction finally closed!
Lessons Learned:
1. Many sellers do not pay enough attention to the day-to-day business operations during the marketing process and this can be detrimental to the eventual pricing.
2. Sellers should be patient to the extent possible, and work with HINGE to pick the right buyer who will be economically and emotionally invested in finishing the purchase.
3. Sellers should consider making physical improvements to their facility even if they anticipate no return on investment with the business and building are for sale. Because as HINGE well knows, there may not be a sale without the facility looking in tip-top shape.
4. Sellers that own the business and real estate are in a unique position to control the means and methods of the exit—selling the business with the property; just selling the business and keeping the real estate; or deciding to keep the business and sell the building under a sale/leaseback.
To learn more about how HINGE Brokers can support your buying or selling needs, please contact us at info@hingebrokers.com.