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Estates agencies

Figures for the number of schools for sale vary around 25. Even in these straitened times, schools remain an attractive option for investors. Jeremy Robertson explains how buyers and sellers are brought together

It is said that some of the most stressful things that can happen to you in this life are marriage, divorce, bereavement, a jail sentence and being fired from work. I am not sure where buying and selling a school comes in this hierarchy, but I suspect that the few individuals or companies who go through the process every year would place it fairly near the top.

It can be a long and involved process with many pitfalls along the way for the unwary. Fortunately, there are ways and means of completing the process that avoid some of the more obvious problems and can lead to a successful outcome, so please read on.

What next?
The secret of success lies in careful planning. For a seller, this means meticulous preparation before the launch date. There are a huge number of items to consider, but perhaps the most important is making the decision that you really do want to sell. This sounds obvious, but it can be particularly difficult for sole proprietors, many of whom have spent years building up the school only to let it go. The thought of it in new ownership can be more than some proprietors can bear. It is surprising how difficult a seller can be when this psychological hurdle has not been overcome at an early stage.

The second piece of advice for a seller is to make sure that the sale is managed by a firm of brokers that specialises in school sales. It is something of an esoteric process, so there are relatively few brokers that have the experience to give good advice and to oversee the process through from beginning to end.

It is vital that the process is kept from the notice of parents, staff and rival schools. A good broker will provide a confidential service, hold comprehensive lists of prospective buyers and sellers, and will have a good understanding of the type of school that buyers are looking for and their price range. The broker acts as an introduction agency and is the conduit between both parties.

In addition, the broker will advise the seller on the preparations for the sale process. This will include employing a legal firm with experience of school sales (an expensive mistake if you choose badly). The broker will tell you to prepare the accounts and ensure that you have completed a valuation of the business and property.

Sellers should bear in mind, though, that your previous twenty years of working long hours will not be taken into account when a valuation is made. The only thing that is of interest is the value of the bricks and mortar, the potential, the goodwill and the profit.

Next stage
Once this is complete, the broker will write an assessment for potential buyers. The assessment does not name the school, but gives general information that includes pupil age range and numbers, buildings, staff, profitability and asking price. Once agreed with the seller, it will then be sent to buyers whose requirements fit the school’s profile.

If all goes well, visits to the school will follow. These will be conducted by the proprietor, who will have planned the itinerary with the buyer in advance. To maintain confidence and avoid alarming staff, pupils and parents it is advisable to agree a guise for the buyer before the visit.

Just as with selling a house, first impressions are important. There are lots of things that can be done, including allowing visits when pupils are hard at work and making sure the visitor receives a warm welcome. We often become used to the imperfections in our homes and schools, but a visitor will instantly notice the chipped paintwork in the main corridor or broken bed leg in the junior dormitory, so some judicious tidying and spring cleaning will not come amiss.

Survey the offering
A buyer, meanwhile, will want to look at all areas of the school, including the grounds and any owner’s accommodation. He/she will need clear answers to important questions such as: numbers on roll, projected numbers, numbers over the past five years, planned developments, number of staff etc. He/she will also want to see the latest accounts and will want to know when the present year’s accounts will be available.

The buyer will usually make a quick decision on whether the school is what he/she is looking for and will tell the broker if he/she wishes to continue with negotiations. The buyer may then request more visits and answers to additional questions before placing a formal offer.

At this point a seller is advised, if the offer is acceptable, to put the proceedings into the hands of the solicitor and an accountant to manage specialist areas such as due diligence, heads of terms and confidentiality agreements.

The buyer
So far we have concentrated on the seller but, of course, the buyer must also be receptive to advice. Buyers come in all shapes and sizes, from teachers wishing to buy their first school, to national and international groups with long histories of school ownership and a ready-made portfolio of schools. Every buyer has specific requirements, which may range from day prep schools to major boarding schools in any part of the UK.

Buyers register their requirements with a broker with whom he/she will develop a good and productive relationship, stating the type of school they are looking for, the geographical area they are interested in and the maximum price they are willing to pay. He/she should have a secure source of finance, with good legal advice to hand.

Buyers have a strong attachment to the value of education, seeing school ownership not just in business terms but also in terms of providing educational opportunities of quality for young people. However, they will also be driven by sound business principles and so will take care to fully understand what it is they are buying.

As in all business transactions, a buyer will carefully review a business before making a commitment. The process of due diligence should reveal any inherent problems in a school and these will have to be investigated and considered before a final offer is made. At all times, a buyer will be guided by his/her legal team and will communicate with the seller via the broker.

Together at last
There’s many a slip ‘twixt cup and lip, and it can often take many months to work through all the problems that emerge during a school sale. School brokers can achieve amazing things but it is surprising how often they get a seller and buyer to the altar only for the knot to remain untied until some final glitch is resolved. All will be well in the end, of course, but it does lend weight to the principle that if you are going to sell or buy a school, give yourself lots of time and plan well.

A seller must make the decision to sell when the school is in a strong position. Waiting until a crisis arises is not a safe or sensible option. A buyer must develop a business plan in good time to be successful. If the ground work is in place from both parties at an early stage, the process will have a much better chance of a successful conclusion or, to complete the analogy, there will be a happy marriage between buyer and seller and all will live happily ever after.

A tale of a sale
In September 2007, a sale of school passed successfully. Here are the experiences of the process for the two parties:

The buyer:
Having nearly bought a school before, I became well versed in what was required: in particular, a good solicitor with experience of school transfer. This can be an expensive part of the process and needs to be part of your budget. A buyer should consider having at least £25-50k available for legal expenses. Confidentiality is key. Proprietor schools don’t have governors to maintain continuity, so parents are buying into you. On buying a school, it is reasonable to expect to lose 10-20 per cent of parents. So it is important to understand the local market for sources of new parents to bring on board. It is a very emotive business: when it’s your own money, it focuses the mind on efficiencies. Apart from an agent to manage the sale, it is also worth hiring a friendly consultant who has experience of the process, possibly another proprietor in a non-competitive location. It could cost you £2-3k, but it is worth every penny.

The seller:
We had come to the end of what we could achieve at this school, so decided to sell and look for a new challenge. We had two previous prospective buyers, but negotiations broke down after both breached confidentiality agreements. Fortunately, we managed to prevent the news of a sale reaching parents’ ears and causing unnecessary concern. We wanted a buyer who matched the school; ones who would keep the ethos. Large corporations don’t necessarily have the parents’ best interests at heart in the same way as a small, family-run one would. After all, when it’s yours, it’s hard not to be protective of the school – proprietors always consider the children first and foremost. But it is also a business and one has to try to keep sentimentality out of the process as best as one can. A good agent helps to smooth the process and brings a greater degree of discretion. We are now embarking on a new venture. We miss the passion behind owning your own school; it certainly is a rewarding vocation.

Jeremy Robertson is a director of National SchoolTransfer.

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