Last week The Times ran an article suggesting that there was a glut of private schools for sale as owners sought to get out amid falling pupil numbers. Another victim of the credit crunch, or business as usual? We reproduce the article below, together with a response from Peers Carter, founder of School Transfer, a company mentioned in the article - you decide...
Secretly for sale: the private schools fearful of a panic exodus
The Times: January 8, 2009 by Alexandra Frean, Education Editor
Smaller private schools are facing a spate of takeovers as pupil numbers decline in the economic downturn, but the children and their parents are likely to be the last to know about it.
At least 25 independent schools are discreetly seeking buyers, ranging from a £3.25 million primary school in the South of England, in a period mansion with a modern sports hall and IT suite, to a £1.35 million prep school offered as a “quick sale”.
Brokers acting as intermediaries for such sales say that they expect more schools to come on to the market over the next term, as parents decide that they can no longer afford to pay fees. They are advising schools against making their financial difficulties public for fear of a a mass desertion by parents. One school in the Midlands had to close within six months of the news of its possible sale leaking out.
Sue Fieldman, regional editor of the Good Schools Guide, said that although the right investor might find “ripe pickings” in the economic downturn, parents and pupils were likely to be the last to know about it. “Parents can end up feeling very aggrieved because they thought they were signing up to a particular school regime and they end up with another one,” she said. “That's why if parents get wind of a sale or any financial difficulties at the school, many would be out of the door like a shot.”
The small, family-owned schools were likely to be most vulnerable, she said. “The smaller prep schools are very vulnerable indeed. This is a shame because they are often very traditional schools that parents are very fond of. We always advise parents to find out who owns the school.”
Most sales of small independent schools are handled by two brokers, the School Transfer Company and National School Transfer. Patrick Carter, of National School Transfer, said that he was expecting to see more privately owned schools coming on to the market as pupil numbers declined.
“I'm certain it's going to happen one way or another,” he said. “Some parents are not going to be able to pay their fees. Now is the time, at the beginning of term with new fees to be paid, when it will become apparent what problems schools will be facing. The most vulnerable schools will be smaller and single-sex ones.”
Peers Carter, of the School Transfer Company, said that he did not expect a glut of smaller schools to come on to the market. “Schools are a brilliant proposition. There's nothing safer to invest in,” he said.
He added that buyers - which could include private individuals looking to invest a legacy as well as chains of schools backed by venture capital - could expect a return on investment of between 10 and 15 per cent.
Such optimism may be misplaced. After the last recession in Britain in 1991, independent schools experienced a steep dive in pupil numbers, losing 11,500 pupils in the following five years. At least two prep schools, Bramcote Lorne in Retford, Nottinghamshire, and Brigg School in Hull, have closed recently after pupil numbers declined. Both schools are part of the United Church Schools Trust and will now merge with other schools in the group.
David Hanson, the chief executive of the Independent Association of Prep Schools, has said that more schools would follow suit as the effects of the recession began to be felt. Two of the leading international chains, Cognita and Gems, say that they are in the market for acquiring new schools. Cognita, whose chairman is Chris Woodhead, the former Chief Inspector of Schools, says that it is in negotiations to buy up to 15 schools to add to the 46 that it already operates in Britain.
A letter from Peers Carter in response to the article above
Dear Sir
I understand the need of newspapers to keep up the relentless stream of bad news presumably it sells papers – but was it really necessary last week to write such a doom laden piece about the independent school sector?
Why did your report talk of panic amongst owners and secret selling? Was this to cause chaos amongst the parents and staff of these, usually excellent, establishments? As founder of one of the company's that was mentioned in the article, I can confirm again – as I did to your correspondent when we spoke - that we have seen no panic selling during this downturn, recession or whatever it is this week and that we have no more schools on our books now than we have had throughout the 24 years that we have been in business.
Not a single owner has approached us ‘panicking’ about likely effects of the recession. Yes, we have some businesses on our books, where the owners simply wish to retire or change lifestyle courses; where illness has made sale desirable or where for various financial reasons – be it demographics, overspending or simply exhaustion and lack of funds to keep up with current legislation and compliance – they wish to pass their businesses on to vibrant new hands. Nobody is panicking though as a result of the financial climate and I wonder why this word was used.
School owners are used to taking a long term view of their businesses and expect to take the rough with the smooth. As businesses go, schools are slow burners and they do not suffer – or enjoy – the dramatic ups and downs of many other types of business.
Parents who commit to independent education are not stupid. They realise before they start that they are signing up to pay fees for between eight and thirteen years. They are usually pretty sure that the project is sustainable for them and that they will be able to keep their children at the independent schools of their choice.
Of course, family and career circumstances can change unforeseeably and some parents will be hit by the recession and have to make painful choices. However, they will only make that decision after giving up nearly everything else first – holidays, expensive cars, bigger houses and so on. Grandparents are often pleased to help out for a few terms whilst adjustments are made if it prevents a child changing school unmnecessarily.
Your article did not mention any of this and yet it is so relevant to the overall picture. If things were as bad as it implied then why are companies like Gems and Cognita so keen to expand their involvement in the sector?
Lastly, why did the article talk about secrecy.
Moving on, I must point out that any business people with any sense sell their business secretly when the time comes. They have to unless it’s a corner shop. We advertise ourselves as confidential agents – always have done for 23 years. Parents and children need a sense of security for their children’s schooling. Instability or the threat of it is more likely than any recession to cause a stampede of parents and pupils. That’s why a company like ours offers a discreet and personal service and a seamless transfer of ownership so that parents and staff are reassured and the business remains stable.
Are pupil numbers down at independent school as the article said? (An article which was picked up and then repeated in other newspapers without question, incidentally.) Possibly. It happens. See paragraphs 3 and 4 above. Well established private schools have been through previous financial downturns – some have been around for many years and survived world wars and the depression.
Finally, I should point out that with my wife I have owned an independent school for over 30 years. It was established in 1905 . We also have a day nursery and our numbers at both are higher this year than ever before!
Point made?
Yours
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