Uptick in numbers of mergers and acquisitions in UK Independent education sector

As a result of the challenging financial conditions in the past few years,  there has been a significant increase in schools exploring mergers and acquisitions (M&A). Many schools in the independent education sector are having to not only adapt to a challenging economic environment, but also the cost of living crisis is putting considerable financial pressure on working parents. If VAT is added to independent school fees then there will be a sharp rise in pressure on the budgets of both households and the independent schools.

After the 4th July 2024 election, a new government could remove the exemption from VAT on independent school fees at a time of its own choosing as part of a new budget, and so it is conceivable this could even become an issue for schools and parents by the time the new school year arrives in September 2024.

M&A activity in the sector will likely accelerate if VAT is applied to independent school fees. In recent years, the education sector has seen a trend of corporate and private equity buyers purchasing pre-schools, academies and independent schools and the creation of educational groups to bring schools together under one umbrella.

Research from specialist education insurer Ecclesiastical has discovered that one in five independent schools are currently going through a merger or acquisition, and two in five have done so during the past 12 months. This research and statistics on M&A activity in the sector in recent years indicates the independent schools market is going through a significant restructuring and that mergers and acquisitions are seemingly being used as one of the main tools of this change. 

In this time of huge overhaul in the educational sector, and in particular for independent schools, it looks likely that we will now see a hectic period of M&A deals in the sector. There will also then be all the associated activities coming to prominence for the leaders and professionals working in the sector to consider, such as financial and commercial due diligence, negotiations, fund raising and investment, and completing the legal documents. Professional services firms such as solicitors and accountants will also be heavily involved in implementing these deals, as will banks and other lenders. 

The end result of all this M&A activity may be that in five to ten years from now the independent educational sector is wholly transformed. 

If you are considering any M&A activity then please get in touch with a legal advisor such as ourselves. 

New research from specialist education insurer Ecclesiastical has revealed the independent school sector is under increasing financial pressures as two thirds (64%) of independent school leaders say their school would be open to considering a merger or acquisition in the future.

https://www.the-educator.org/movers-and-shakers-two-thirds-of-independent-schools-considering-mergers-and-acquisitions-due-to-financial-pressures/