Rising Demand and Private Equity Consolidation in Early Childhood Education

Early childhood spans the period up to eight years of age, which UNICEF identifies as critical for cognitive, social, emotional, and physical development. The market built around it is made up of establishments providing public and private education to children typically between zero and five years old, offering preschool, nursery school, and daycare programs in a safe and nurturing environment. In the US, that industry has grown at a 3.6% CAGR from 2019 to 2024 and now generates $22.6 billion of revenue.

Demand is what makes the sector durable. Parents are increasingly focused on a child’s overall development rather than education alone, governments on both sides of the Atlantic keep expanding early learning budgets, and the US population of children five and under is projected to grow through 2050. Those conditions have drawn private equity into a previously overlooked and highly fragmented industry, and consolidation is now the defining feature of early childhood education dealmaking.

Early Childhood Education at a Glance

The Early Childhood Education market is comprised of establishments providing public and private education to children typically between zero and five years old. These centers offer a variety of programs, including preschool, nursery school, and daycare, to foster development in a safe and nurturing environment. The US industry has experienced a 3.6% CAGR from 2019 to 2024 on average, with current revenue of $22.6 billion.

Growth is driven by rising demand for preschools and childcare centers as parents increasingly focus on their child’s overall development rather than solely their education. Additional government funding for Head Start and the Child Care Development Fund, alongside the American Rescue Plan Act, supported the market’s revenue growth in recent years despite the revenue volatility of the industry. Industry revenue is attributed to pre-kindergarten programs, at 83%, and toddler education programs, at 17%.

The Public Market Bellwether

Bright Horizons Family Solutions Inc. (NYSE: BFAM), a leading provider of high-quality early education and childcare, holds a market share of 6.9% and accounts for 4.1% of total US industry revenue. The company generated $623 million of revenue in Q1 2024, an increase of 12% compared to Q1 2023 on enrollment gains and tuition price increases, and guided to fiscal year 2024 revenue in the range of $2.6 billion to $2.7 billion.

Global Growth and Public Funding

The global ECE market is anticipated to maintain a strong growth output with a robust CAGR of 11.8% from 2020 to 2030, reaching $677 billion by 2030. That growth is attributed to the upskilling of educators, parents’ increasing awareness of the importance of early education in children’s development, wealth creation and accumulation in the global economy and especially in emerging markets, and the desire to foster general wellbeing and enhance children’s school readiness.

Governments around the world continue to increase ECE funding to support more children gaining access to quality education. The UK government has allocated £180 million to improve children’s development in the early years, according to the UK Department of Education. In the US, the FY2025 budget proposal includes an additional $500 million for the Child Care and Development Block Grant and an extra $544 million for Head Start. The FY25 budget also allocates $14.9 billion in mandatory funding over 10 years, with $9.9 billion aimed at expanding access to high-quality childcare and $5 billion dedicated to preschool initiatives.

M&A Activity Demonstrates Continued Momentum

The global ECE sector continues to show elevated levels of M&A activity, though 1H 2024 deal count sits below the pace of 2022’s record 342 transactions. So far in 2024, there have been 98 M&A transactions in the sector, split 41% financial buyers and 59% strategic buyers. As economies continue to stabilize and consumer confidence improves, strong volume is expected to continue through 2024 despite the slowdown of growth in 2023. Driving factors include increased awareness and importance of early education, greater workforce participation, government initiatives, and significant interest from private equity groups.

Those elements have driven growth in childcare centers, preschools, and nurseries, which account for most of the sector’s M&A transactions. The remaining transactions involved ECE curricular development companies, EdTech companies, and education management software. Procare Software, a developer of childcare management software, was acquired by Roper Technologies (NASDAQ: ROP) for $1.86 billion in January 2024. Bright Stars Nursery acquired Barnkids Nurseries, both childcare providers based in the United Kingdom, for an undisclosed amount in February 2024. Kido, an operator of early childhood education and care programs, acquired Monkey Puzzle Nurseries, an operator of nurseries in the United Kingdom, for an undisclosed amount in May 2024. In April 2024, After School Terakoya, a provider of after-school childcare services in Japan, was acquired by SOLIZE (TKS: 5871).

Private Equity Influencing Transaction Growth

Private equity firms have significantly increased their involvement in the ECE sector in recent years, seeing the potential for growth and consolidation within a previously overlooked and fragmented industry. Eight of the eleven largest US childcare chains by capacity are now owned by private equity groups, including KinderCare Education, Learning Care Group, Goddard Systems, and Primrose Schools. Sponsor interest is driven by the industry’s resilience and revenue potential from franchise opportunities and consolidation, and franchise-operated companies typically command high multiples from buyers who want to bet on businesses that generate high royalty fees.

In January 2024, Avathon Capital sold Big Blue Marble Academy to Leeds Equity Partners while later acquiring Magical Beginnings Learning Centers, a network of seven ECE centers in the Greater Boston area. Baring Private Equity Asia (BPEA EQT) privatized Benesse Holdings in March 2024 through a $1.37 billion acquisition of the educational facilities and childcare services operator. Activity is expected to continue through 2024, with Roark Capital exploring the sale of Primrose Schools in a process that could value the franchise at nearly $2 billion.

Notable Transactions

February 2024: Kids Planet Day Nurseries expanded its portfolio with the acquisition of Kingfisher Day Nurseries, an operator of three daycare centers across Derbyshire, United Kingdom. Kingfisher serves over 180 children between one and four years old. Kids Planet now operates more than 190 day nurseries across the UK offering nursery care and early childhood education, and has completed 72 deals over the company’s lifetime, six of them in 2024.

March 2024: BPEA EQT (Baring Private Equity Asia) partnered with EFU Investments (New Zealand) to acquire and privatize Benesse Holdings, a Japanese holding company operating educational facilities and childcare services. Benesse is Japan’s largest provider of education services for all ages, with over 16,000 employees and operations in China, Taiwan, South Korea, and the US. EQT is a Swedish investment organization with ownership in Europe, Asia-Pacific, and the Americas.

March 2024: AcadeMedia (STO: ACAD) acquired Touhula Leikki, an operator of children’s daycare centers intended to provide early childhood education. AcadeMedia is an education and consultancy provider operating preschools in Northern Europe. The acquisition includes 113 daycare centers with over 7,000 children, forming one of the largest Nordic private daycare groups with operations in Sweden, Norway, Finland, Germany, and the Netherlands. AcadeMedia is active in the M&A space with more than 30 previous deals.

May 2024: Cadence Education, a large, well-known childcare provider in North America, acquired Castle Montessori Schools, an organization providing a nurturing environment for children from infancy to elementary age in Texas. The deal expands Cadence’s geographical presence and enriches its diversified portfolio with high-quality schools. Cadence has over 30 years of experience and is active in the M&A world with more than 20 previous deals.

Buyer Universe

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

Select 2024 Transactions

The table below summarizes transactions announced or completed in the early childhood education sector during 2024, spanning childcare centers, preschools, nurseries, and adjacent training and software providers.