The Education Business Transaction Process
The process of selling an education business can differ greatly from other small business sales due to types of buyers in the market, valuation methodologies, licensing transitions, and confidentiality concerns with staff and parents. Even the team you choose to guide you through the process can affect the ease and outcome of the transaction.
At HINGE Advisors, we’ve specialized in selling early education businesses for more than 20 years. Our team even has a whopping 300+ years of combined experience within the industry and strong relationships with more than 500 active buyers. This familiarity has allowed us to close more transactions for educational organizations than any other broker in the nation. Learn more about our personalized, 10-step sales process below:
Pre-Listing: Getting to Know You
Once you decide you’re ready to sell, the HINGE team begins gathering information for our in-house financial analyst to perform a valuation of your business. If we believe your school is an attractive asset for our buyers and you are happy with the outcome, we’ll travel to meet you and tour your school! Tours are managed carefully — usually outside of operating hours — as confidentiality is incredibly important throughout the process. After the tour, it’s time to execute the Listing Agreement. At HINGE, we don’t charge retainers or fees for any of our initial processes like many brokers do. As a matter of fact, we don’t get paid until we close your transaction. This way, our sellers know we’re in this together and are confident we can get the sale done.
Marketing: Finding the Right Buyer Match
After the Listing Agreement is signed, it’s matchmaking time! Our team gets to work culling through our list of 500+ buyers — all of whom are cash buyers with experience in the early education industry. Once a list of potential buyers is developed, we discuss the pros and cons of each buyer with the seller: What’s their overall process like? How will they treat my people? How burdensome are their legal agreements? What’s the typical length of their processes? No buyer is approached without first being approved by the seller. We also put together a comprehensive marketing package called an Offering Memorandum (OM) in this phase. Interested parties only get access to the OM after signing a confidentiality agreement (NDA).
Indication of Interest: Make Me an Offer
An Indication of Interest (IOI) is a precursor to an official offer that outlines a proposed price as well as major deal terms. This initial offer phase allows the HINGE Advisors team to vet potential buyers by understanding their seriousness about the opportunity. Our team reviews preliminary offers with our seller to make decisions about how many and which potential buyers move to the next phase of the process.
Touring: What You See is What You Get
After IOIs are received, interested parties will want to tour the school(s) and see them in action. Typically, buyers prefer to tour during working hours. They do this by acting as a ‘consultant,’ ‘insurance provider’ or ‘friend of the industry.’ However, since the pandemic, many buyers have adjusted to touring outside of operating hours and can be more flexible. The HINGE team is always present at an off-site location to meet with the seller and potential buyer before and after all tours.
Letter of Intent: Let the Negotiations Begin!
After the tour, interested parties get to present an official offer which comes in the form of a Letter of Intent, or LOI, and the negotiations begin. The seller, with guidance from their transaction advisors, chooses our winner!
Diligence: Transition of Information
Every transaction has buyer and seller transition teams. The HINGE team coordinates with both sides during the diligence process to ensure as smooth a transition of information as possible. This process can be time consuming, but with effective communication and set processes and protocols, our in-house transaction manager makes it as painless as possible. Diligence includes a transition of a range of business details that we like to separate into buckets: corporate, facilities, financial, employees, operations, marketing, IT, legal and real estate.
The Agreements: Time to Sign the Dotted Line
The definitive legal agreements that may be a part of your sale include an Asset Purchase Agreement (APA) or a Stock Purchase Agreement (SPA) and will include a Purchase and Sale Agreement (PSA) if you are also selling your real estate or a real estate lease.
Buyer Licensing: Making Sure You Meet Requirements
This step in the process can be vastly different depending on where your business is located. Every state — and even counties and cities within states — has their own licensing regulation laws. Luckily, the team at HINGE has closed transactions in majority of the United States and can support you through this process.
Staff and Parent Announcements: We’re All in this Together
After legal agreements are signed and licensing has been dealt with, it’s time to tell your staff and families about the sale at an agreed upon date prior to close. We recommend telling management a couple of weeks ahead of closing. This is usually conducted jointly with the buyer and seller after diligence is waived. For other staff and families, this is typically done a week ahead of closing via a jointly written letter from the buyer and the seller with seller staff then on-site for a few days to answer any parent/staff questions.
Closing Time: You don’t have to go home but you can’t stay here.
Let the celebrations begin! Whatever your exit strategy, you’ve certainly earned some well-deserved rest and relaxation. Congratulations!
The good news for those thinking about selling right now is that the childcare market is hot, hot, hot and buyer interest is at an all-time high. If you’re considering selling your childcare business, get in touch with our team at info@hingeadvisors.com so we can chat about your particular situation and get your process started today!