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ISIS exits KidsUnlimited for £45m

publication date: May 1, 2008
author/source: Ed Tranham

The merry-go-round that is children’s day care nurseries continues, with the secondary buyout of KidsUnlimited from ISIS private equity for £45m.

In March we speculated that ISIS would exit if the price was right and along came Lloyds Development Capital (LDC) to take a significant minority shareholding in the fifth largest operator of children’s nurseries in the UK. The deal has been supported by debt funding from Barclays Bank (£17m term loan facility, £3.6m for capex and a £1m revolving credit facility). The management team, led by chief executive Lee Pearson and non-executive chairman Graham Smith, has also increased its equity.

KidsUnlimited’s last filed accounts for the year ending 30 April 2007 showed revenues of £27m (now believed to be around £30m) and an EBITDA of only £613k. So what has attracted LDC to KU?

First, forecasts continue to paint a positive outlook for private nursery provision with growth estimates of around 10% for the next three years. LDC sees KU continuing to expand in its key regions in the north-west, Midlands and south–east of England. Second, the business is partly backed by bricks and mortar – assets that are not currently included in the balance sheet at market value.

However, margins in this sector are tight and given the economic downturn demand for places and credit control – which has already been a problem at KU – could impact on performance going forward.

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