When is the Best Time to Sell My School?

When it comes to the successful sale of a business, one of the most important factors is timing. Many business owners may not take into consideration all the factors used to determine when the “best” time to sell may be. In fact, one of the best times to sell a business is when things are running smoothly, the company has validated solid performance and the future outlook looks bright. As a seller, you should also advise a sell-side advisor who can provide market specific knowledge to help construct timeline for when is best to go to market. (See our blog post from November, 18th for more information on the importance of working with a sell-side advisor HERE.)

Buyers are looking for high-performing schools with a successful track record. In addition, buyers look for future upside potential and will often target specific demographic markets. Buyers are willing to pay a premium for your business when operations are running efficiently and the horizons are bright.

Timing Factors of Consideration

Our team has come up with 5 key factors of consideration to discuss with your sell-side advisor when assessing a timeline for the sale of your business.  It is uncommon for all five factors to peak concurrently, but evaluating each factor individually will help strengthen your chances of receiving an offer above asking price.  Key factors include:

• Macroeconomic Conditions

  • Positive macroeconomic factors include events that subsequently foster prosperity and economic growth such as a growing stock market, low inflation, low interest rates and high market confidence make for an environment poised for growth and activity.

  • Today, with a vaccine on the way, a number of companies are finding strong vaccine testing results in the fight against COVID-19. It is only a matter of time until the virus is under control and life starts to return to normal. In addition, with record low interest rates and the stock market hitting all time highs, the conditions are great for sellers looking to get a high premium on their business.

• Market Trends

  • Every market segment experiences its ups and downs, the goal is to sell the business when you are in a positive, up-trending market. This will hopefully lead to a competitive bidding process between multiple buyers, ultimately driving the price up. Acquisition activity and purchase price are higher during positive market trends.

  • Due to COVID-19, acquisition activity has, for the most part, been on hold. There are many buyers starting to re-entering the market with cash to invest. The economy rebounded from the virus better than expected and with childcare deemed an essential business in many states, businesses seem to be getting back on track. (See our blog post summarizing the Yale Study finding that there is no elevated risk of COVID-19 transmission in daycare centers when preventative measures are taken HERE.)

• Business Performance

  • Any potential buyer is going to want to see that the business has a track record of being profitable. In addition, buyer always like to see an area of growth potential in the business whether that be available land to expand the facility or reorganizing classroom utilization to grow enrollment. These characteristics will attract more interest from buyers and lead to a competitive bidding process, driving up the final purchase price.

• Capital Flows

  • At certain times in history, there is an abundance of capital from strategic buyers ready to flood the market, which will often lead to buyers competing for deals and paying higher multiples in return.

  • With many buyers sidelined since March, there is a lot of capital entering the market from strategic buyers looking and willing to pay a premium for the right school. 

• M&A Market Activity

  • The more transactions going on in the general market, the more buyers you will see in said market. When a market is trending well, you will generally see high M&A activity as companies further establish their footprint and grow their brand.

  • With more buyers entering the market every day, we are starting to see an uptick in activity as deals begin to close again. In these next few months, we expect to see a spike in M&A activity in the early education industry and now is a time when buyers are willing to may a premium for a high performing business.

In summary, the best time to sell your business is when the company is performing well, macroeconomic conditions are positive, market conditions are trending up, and when the future looks promising.  These factors will ensure a high premium is paid for your business. 

Today, many buyers are beginning to re-enter the market after being on hold since mid-March. This has led to build up capital and buyers are looking to buy high performing schools, paying a premium for the right opportunity.  With low lending rates and a positive outlook on macroeconomic conditions as there’s a vaccine on the way, we expect to see a competitive market with high acquisition activity in the coming months.