The chief executive of a nursery group has led a management buy-out which has seen it exit administration and unlock £1m of new investment.
Adam Sage, who joined MiChild in August 2020, has restructured the company’s lending facilities and is to use the new funds for a number of refurbishment schemes at its nurseries, as well as supporting the development of staff.
Founded in 2019, MiChild operates 16 children’s nurseries and preschools in Greater Manchester, Cheshire and Lancashire.
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Mr Sage is a former chief financial officer at Asquith Nurseries and the group currently employs 250 early years professionals.
The new company is 50/50 owned by Mr Sage and chairman Chris Ross-Roberts, who has previously been group finance director at BPP Holdings, CFO at Cabot Credit Management and CEO at Alexander Mann Group.
The administration has been described as a 'procedural process to facilitate the management buy-out', and did not impact the day-to-day running of the nurseries.
Since being established, the group has acquired several nursery sites in a 'but and build' strategy, according to administration documents filed by BDO with Companies House.
To complete the deals, funding had been secured through TPAL and Lendnet, totally c.£10m.
In August 2021, TPAL and Lendnet instructed BDO to undertake an independent business review of the group which identified that it "could not afford the mandatory prepayment of £300,000" which was due on September 28, 2021.
It also revealed that the quarterly capital repayments on the TPAL and Lendnet facilities may not be paid for another two years "due to insufficient level of forecast EBITDA".
As a result, the lenders agreed to defer the prepayment to November 19, 2021, "whilst the company explored its options, including a turnaround plan". A further deferment of the prepayment was made on December 24, 2021.
In early October, the company instructed Mazars LLP's debt advisory team to seek an alternative lender to refinance the TPAL and Lendnet facilities.
BDO's statement said: "We understand a number of lenders were approached, however, the debt advisory process did not identify an alternative lender to refinance the TPAL and Lendnet facilities in full."
At the same time, Mazar LLP's corporate finance mergers and acquisitions team was instructed by the shareholders and the company to put the group's shares up for sale.
A total of 22 potential interested parties from both trade and private equity were approached which resulted in one party submitting an offer.
However, "the company's controlling shareholder and the connected party could not agree on a considerable value for the shares and the offer was not progressed", BDO added.
Shortly after the joint administrators were appointed, an offer of £50,000 was made to the shareholders from MiParent Holdings, which is jointly owned by Mr Sage and Mr Ross-Roberts, to acquire the company's shares.
The BDO documents also confirm that the interest outstanding on the TPAL and Lendnet facilities of c.£216,873 up to December 31, 2021, has been deferred until April 1, 2023.
The group has also secured new lending of £200,000 from TPAL and £200,000 from MiParent Holdings.
Mr Sage said: "The new structure and investments are aimed solely at bringing benefits to the parents and children who use our nurseries on a daily basis as well as our teams of early years practitioners.
"This is a hugely exciting opportunity to continue to develop MiChild Nurseries Group with a focus on delivering quality childcare inspiring environments for our staff, parents and children.
"Although things have changed behind the scenes, it is very much 'business as usual' approach for us but with the added element of new investment into the group.
"I cannot wait to get started on this exciting new chapter for MiChild and to continue to work with our amazing and dedicated teams of people who have shown such immense resilience throughout the pandemic.
"I cannot thank them enough. They have an incredible desire and willingness to make our nurseries and childcare the very best.
"Over the course of the next few months, we are set to invest a significant six-figure sum in both our childcare teams and in our buildings and learning environments to drive continued and sustainable growth.
"We have a vision for MiChild to be a leading provider of quality childcare in the North West region and to ensure that children in our care receive the very best start in their early years.
"Chris has extensive educational experience having been CFO of Europe’s largest professional education group and a board member of a multi site schools group.
TLT LLP, led by M&A nursery specialist Mark Traynor, advised MiParent Holdings on the deal.
