Demand Is on the Rise: Record Deal Volume and a Private-Pay Base in Early Childhood Education

Early childhood education covers the period up to eight years of age, the window UNICEF identifies as critical for cognitive, social, emotional, and physical development. Commercially it is a fragmented, largely private-pay category built on physical centers, and it came out of the pandemic with more demand than it went in with. Parents returned to the workforce, employers began requiring physical presence again, and the result was a record year for consolidation.

The numbers behind that are stark. The global market is projected to reach $520 billion by 2028 at an 11.8% CAGR, deal volume hit 256 transactions in 2022, and average sector EBITDA multiples of 10.3x sit above the broader middle market. Roughly two thirds of early childhood education spend comes from private sources, which is the highest private share of any education segment and the reason the category attracts capital the way it does. Governments are adding to that base rather than replacing it.

ECE Industry at a Glance

How the Market Segments

The category divides into three age bands: 5-8, 3-5, and under 3. In recent years the 5-8 segment has accounted for the largest share of the market, but the 3-5 segment is growing rapidly at a CAGR of over 11% and is driving much of the sector’s growth. That distinction matters for buyers, because the 3-5 band is where preschool and pre-K programming sits and where per-child revenue and curriculum attach rates are highest.

Product Types and Delivery

There are two main product types: distance education institutions and early childhood education schools. Physical education centers dominate the market relative to other company types, including EdTech and distance education businesses. Early childhood education schools play an essential role in nurturing children’s socializing abilities, and parents’ concern to support their kids’ socio-emotional well-being drives that segment’s growth. In practical terms, this remains a real-estate-and-staffing business with a software layer on top rather than the reverse.

Global Growth Post-Pandemic

Market Size and Growth

The global ECE market is anticipated to maintain a robust 11.8% CAGR from 2021 to 2028, reaching $520 billion by 2028. Growth is attributed to the upskilling of educators, parents’ increasing awareness of the importance of ECE to development, wealth creation and accumulation in the global economy, especially in emerging markets, and the desire to foster general well-being and enhance children’s school readiness.

Bright Horizons Family Solutions (NYSE: BFAM), a key player providing childcare services, generated $554 million in revenue in the first quarter of 2023, an increase of 20% on the first quarter of 2022, with full-year 2023 revenue expected between $2.3 billion and $2.4 billion. In 2022 the company’s revenue was forecast to grow 9.3% annually over the following three years, against an 8.5% growth forecast for the US Consumer Services industry.

Government Funding Is Additive

Governments continue to increase ECE funding to support more children gaining access to quality education. The UK government allocated £180 million to improve children’s development in the early years. In the US, Congress passed a $1.5 trillion bipartisan spending package in March 2022 that included approximately $18.4 billion for childcare and early learning programs, an increase of nearly $585 million on previous funding. Public money is expanding the addressable base here rather than displacing private pay, which is what distinguishes ECE from most other education segments.

ECE M&A Volume Surpassed Pre-Pandemic Levels

M&A volume in the ECE sector set an annual record in 2022, with 256 relevant transactions announced or completed worldwide. Volume had fallen to 128 in 2020 from 230 in 2018, then recovered to 224 in 2021 before setting the record. Through August 2023 there were 114 transactions, with a median deal size of $160 million.

Buyer Mix Is Almost Evenly Split

Of the 256 transactions in 2022, 132 were financial buyers and 124 were strategic, a 52% to 48% split. That balance is unusual. In most education segments strategics dominate or sponsors dominate; here the two compete directly for the same assets, which supports pricing.

What Is Actually Trading

Most of the activity sits in childcare centers, preschools, and nurseries, and the transaction record below reflects that: single-site and small-chain nurseries acquired by regional consolidators, over and over. Kids Planet, Family First Day Nurseries, Bright Stars Nursery, Busy Bees, and BGF each appear repeatedly. The remaining transactions involve ECE curriculum developers and EdTech companies, such as Marbotic, an online service combining traditional toys with digital technology.

Three deals illustrate the range. Busy Bees Nurseries acquired Alderley Day Nursery in March 2023 for an undisclosed amount, both childcare providers. KidsKonnect, which supplies teachers with worksheets and digital learning materials, acquired Blossom Educational, an EdTech company specializing in management software for preschools and nurseries, in April 2023. Also in April 2023, Global Group, a provider of childcare support services in Japan, acquired Tokyo Tatemono Kids, a childcare support operator based in Chuo-ku.

Valuation Insight

M&A transaction EBITDA multiples in the Education and Training market have averaged a robust 14.0x over the past three years. The ECE sector average is 10.3x, above the 8.8x middle-market average over 2022 to 2023 year to date. The rapid adoption, development, and integration of technology by ECE companies has improved business efficiency, which has propelled valuations.

The caveat is disclosure. Only four of the 142 transactions below disclosed an enterprise value and only two disclosed an EBITDA multiple, at 7.98x and 7.75x. The 10.3x sector average therefore comes from a wider dataset than the transaction list on this page, and the two disclosed multiples sit well below it.

AcadeMedia completed its acquisition of Fürstenwalder Aus- und Weiterbildungszentrum gGmbH (FAWZ) in November 2022. FAWZ operates one preschool, seven compulsory schools, three upper secondary schools, and adult education in Fürstenwalde and nearby towns in Germany, and served approximately 2,340 students with 320 employees in fiscal 2021. AcadeMedia is the largest independent education provider in Northern Europe, running approximately 550 units across Sweden, Norway, and Germany. The transaction value was EUR 19 million against FAWZ EBITDA of approximately EUR 2.4 million, a 7.9x multiple. Marcus Strömberg, CEO of AcadeMedia, said the acquisition was in line with the company’s strategy to expand its international business and strengthened its position as a long-term education provider in Germany.

Navagant Case Study

Navagant served as the exclusive sell-side advisor to Conscious Discipline on its acquisition by Prairie Capital. The company sits adjacent to the centers and nurseries in this report rather than inside them: it sells the social-emotional learning method that early childhood and K-12 educators are trained on, which is the curriculum-and-professional-development layer of the same market.

Notable Transactions

March 2023: Busy Bees Nurseries announced the acquisition of Alderley Day Nursery, a Montessori childcare provider in Cheshire, United Kingdom. Busy Bees operates a chain of childcare centers focused on preparing children socially and academically for primary schooling. The group has completed 61 deals over its lifetime, 16 of them from 2021 onward. Most have occurred in Europe, though it has also completed deals in the US and is actively seeking new investments.

February 2023: Cadence Education, a large childcare provider in North America, announced the acquisition of The Suzuki School, which provides classroom education for young students in Atlanta, Georgia. The deal expands Cadence’s presence into the Southeast. Cadence has 29 years of experience and more than 20 previous deals.

March 2023: Bright Stars Nursery announced the acquisition of Lilliput Children’s Centre, which provides educational services for children ages 5 and under in the United Kingdom. Bright Stars is one of the largest childcare providers in the UK, serving almost 9,000 children across England, and the acquisition adds to that footprint.

May 2023: Early Bird Education Group announced the acquisition of Brookshire Learning Center, an early childhood development institution in Indiana caring for children from 8 weeks to 12 years old. Early Bird primarily serves younger children, so the transaction extends it into a larger age range.

Public Company Data

The listed set is small and geographically split: AcadeMedia in Sweden, Benesse in Japan, Bright Horizons in the US, and G8 Education in Australia. Bright Horizons is the outlier on both sides of the ledger, trading at 3.4x revenue and 22.0x EBITDA on 16% growth and a 15% margin, while the other three trade between 0.7x and 1.6x revenue. All four were profitable at the EBITDA line, which is not true of most education comparable sets, and margins clustered tightly between 9% and 15%.

Select Transactions

The table below covers 142 ECE transactions from January 2022 through June 2023. The concentration is unmistakable: the great majority are single-site or small-chain nurseries, preschools, and childcare centers in the United Kingdom, acquired by regional consolidators, with a smaller set of EdTech, curriculum, and assessment businesses alongside them. Enterprise value and multiples are shown where disclosed, which is only four transactions.

Buyer Universe

Our team has long-standing relationships with many of these firms through recent transactions in the Education and Training industry. We also track buyers that have been highly acquisitive in the ECE sector, particularly those completing notable M&A transactions. That sector expertise and network gives us insight into this buyer universe and into the growth drivers for the companies within it.