Client: Private equity professional
Facility: £525,000 business loan
Purpose: Leasehold children’s nursery acquisition
Background: Private equity professional seeks entry into childcare market
Our client was seeking finance to acquire an established children’s nursery business in Perth, Scotland, as the first step in a buy-and-build strategy. The initial acquisition would provide a strong platform business, with the intention of improving operational performance and then expanding the group by buying additional nurseries over time.
With a strong team experienced in private equity, nursery operations and people management, our client had identified a well-run nursery operator in Perth with solid fundamentals and clear scope for operational improvement, making it an ideal foundation for future growth.
The financing challenge: A complex deal structure
The purchase price was £750,000 with an intricate payment structure:
- £525,000 required upfront (the loan amount we needed to secure)
- £95,000 cash injection from the buyer
- £130,000 deferred payment over 12 months (demonstrating seller confidence)
Loan serviceability was strong, with confirmed occupancy several months ahead and planned price increases. However, the security was a challenge because it was a leasehold purchase. Although there was an option to purchase the freehold within three years, we needed to find a lender comfortable with leasehold security on a £525,000 commercial loan.
Solution: Matching the right lender to the acquisition opportunity
The leasehold security, together with the buy-and-build ambitions and the deferred payment structure, created complexity that is off-putting to many lenders.
We specifically approached lenders we know understand ‘buy-and-build strategies’ and have an appetite for leasehold commercial properties, provided the underlying business fundamentals are strong. By framing this as the first step in a regional consolidation play (with further nursery acquisitions planned), we positioned our client as a growth-oriented borrower who would bring repeat business.
Our approach focused on three key angles:
1. Highlighting the quality of the asset
We highlighted the nursery’s strengths and demonstrated that it was a stable, profitable business with growth potential. We also positioned the deal within broader sector trends, underscoring healthy future demand.
2. Emphasising management continuity
With all existing staff, including management, remaining post-acquisition, we emphasised that operational risk during the transition had been eliminated.
3. Demonstrating the borrower’s strategic capability
We presented our client’s comprehensive business plan, covering sector research, market analysis, and future acquisition targets, thereby demonstrating the depth of their preparation.
The outcome: Acquisition finance realised
We secured £525,000 in funding at competitive rates, enabling the acquisition to proceed on schedule. Our client is now well placed to execute their buy-and-build strategy, with this acquisition serving as a platform for future growth throughout Eastern Scotland.
