- Before granting one buyer exclusivity, compare the offer’s cash at closing, conditions, and plans for each center with your other options.
- A higher headline price may deliver less cash at closing if the offer includes an earnout, rollover equity, or financing conditions. Ask how the buyer plans to fund the purchase.
- If you own a center’s building, confirm whether the buyer’s price includes it or assumes a separate lease.
- Check licensing and program approvals for each center. The buyer’s plans for directors and staff also affect whether care can continue smoothly.
- Limit who learns about the discussions until you have a plan for telling staff and families. A confidential check with other buyers may be worthwhile before you grant exclusivity.
Why a childcare acquisition offer needs its own evaluation approach
Evaluate each center’s ability to keep operating under the buyer before you judge the offer’s price or closing date. Licensing, subsidy participation, and program approvals may depend on the state, the buyer, and the deal structure. A proposed closing date carries less weight until you know which approvals the buyer needs and who will pursue them.
The buyer’s plans for directors and staff also deserve attention. Experienced employees help maintain daily care and family relationships, while news of a possible sale can unsettle staff and parents before you have made a decision. Ask how the buyer plans to retain key people and protect confidential information during negotiations.
Property terms can change what the offer pays you. If you own a center’s building, find out whether the stated price includes it. If you lease, find out whether the buyer needs a new lease or the landlord’s consent.
Reading the offer: funding, structure, and what cash actually reaches you
A buyer’s headline price does not tell you how much you will receive at closing. Compare the value assigned to the operating business with cash at closing, possible future payments, ownership you would retain, and the conditions for closing. Equity value is the value of your ownership after adjustments to the operating-business value, including agreed treatment of debt and cash. Your payment at closing may be lower still because of expenses, escrow, or payments deferred until later. the authors’ guidance on letters of intent recommends addressing price and payment structure before granting exclusivity.
| Offer term | What to ask the buyer |
|---|---|
| Funding and credibility | Which entity will buy the business, what funds are available or committed, and what evidence supports the buyer’s ability to close? |
| Cash at closing | How will debt, transaction expenses, any escrow, and a working-capital adjustment affect your payment? Working capital is generally current operating assets minus current operating liabilities; the purchase agreement sets the target and calculation. Escrow is cash withheld at closing to cover potential claims. |
| Contingent consideration | An earnout is a possible future payment tied to agreed results. Which results trigger payment, and can the buyer’s decisions after closing affect them? |
| Rollover | Rollover equity is an ownership stake you retain as part of the deal. What rights come with it, and when could you sell it? |
| Financing conditions | Does closing depend on a lender’s approval or the buyer raising more capital? Which internal approvals remain? |
About a dozen quick questions and two minutes get you a ballpark range for your business, built from published industry transaction multiple ranges, with the math behind it. It is a directional estimate, not a formal valuation.
Value My BusinessHypothetical comparison, not a real transaction. Both offers below use the same assumed debt, working-capital shortfall, and seller expenses. Offer A proposes an $8 million enterprise value for the operating company. Enterprise value is the agreed value of the operating business before adjustments that determine what the seller receives. For this example, assume no excess cash or other adjustments. Deduct $600,000 of debt, a $200,000 shortfall against the agreed working-capital target, $400,000 held in escrow, and $200,000 in seller transaction expenses. Pre-tax cash at closing would be $6.6 million. The escrow could be paid later, subject to claims.
Offer B proposes a $9 million enterprise value for the operating company, but includes a $2 million earnout and $1 million in rollover equity. With the same debt, working-capital shortfall, and expenses, and no escrow, pre-tax cash at closing would be $5 million. The $5 million cash payment is separate from the $2 million potential earnout and the $1 million stated value of rollover equity. The earnout may never be paid, and the retained stake’s value can change. Neither offer includes a property sale. Different debt, working-capital, or expense assumptions would change the cash payments.
If the buyer plans to use its own funds, ask what money it can commit and whether its board or other decision-makers have approved the deal. For a buyer backed by an investment firm, ask whether its investor funding is committed and whether debt financing is still conditional. Funding documents help you test the offer, but they do not guarantee a closing.
Owned real estate, leases, and what they do to the offer
A childcare offer can treat the building in several ways, and each changes what you receive. If the buyer wants both the business and building, ask for separate prices. If you sell the building but retain the operating business, your business may lease the space from the new property owner. That arrangement is a sale-leaseback. If the buyer acquires both the center and the building, ask how it has priced each asset. If you keep the building instead, you can negotiate a new lease with the buyer and receive rent after closing, but you retain landlord responsibilities.
Rent can also affect the operating-company price. If your operating company pays below-market rent to a family-owned property company, its reported earnings may be higher than they would be under the lease the buyer expects to use. Ask the buyer to show the rent used to price the operating business and explain any adjustment. Salt Creek’s childcare valuation guide explains how related-party rent can affect that calculation.
Compare property terms separately from the operating-business price so that two offers covering different assets do not appear equivalent. If you will keep the building, ask the buyer to specify the proposed rent, lease term, and renewal rights. For a center you already lease, check whether the existing lease requires landlord consent to the proposed transaction.
Licensing, subsidy, and program approvals the buyer must clear
Before granting one buyer exclusivity, list the licenses and program approvals that buyer would need for each center. Ask the relevant authorities whether the buyer needs separate reviews for the child care license, publicly funded programs, and food reimbursements. The requirements depend on the state, the programs you operate, and the proposed deal structure.
| For each center, record | Question to resolve |
|---|---|
| Child care license or permit | Which authority reviews the ownership change, and who must apply? |
| Director and staff credentials | Will the proposed director and staffing plan satisfy the licensing authority? |
| Pre-K and subsidy programs | Does each program require its own approval, and can payments continue during review? |
| Child and Adult Care Food Program, or CACFP, where applicable | When can the buyer begin claiming meal reimbursements? |
| Owned property or leased site | Does the buyer need a landlord’s consent or a separate property agreement? |
Washington’s rule illustrates why you need to check each state’s requirements. Under Washington’s early-learning license-transfer rule, a full license may transfer only if the department makes the required determination before the transfer, including whether the new operation will be substantially similar to or better than the current one. The rule identifies factors the department may consider, including staffing, proposed program changes, and the physical setting. A signed purchase agreement alone does not make that agency determination.
Ask your attorney and each relevant agency to verify the requirements for your centers. Before granting exclusivity, require the buyer to put its approval plan in writing. The plan should name who will file each application, who will manage the schedule, which approvals must arrive before closing, and what each center can operate or claim for reimbursement while an approval remains pending.
Director, staff, and family confidentiality during negotiations
A sale discussion can unsettle staff and families if they hear about it before you have a plan to answer their questions. Limit early conversations to people who need to know, and ask each buyer who will see your information. A confidentiality agreement gives you a basis to restrict disclosure, but it cannot guarantee that negotiations will stay private.
Start with site-level enrollment, tuition, and staffing summaries that do not identify children, families, or employees. Share identifying records only when the buyer needs them for a defined review. The FTC’s guidance on protecting personal information recommends limiting sensitive data to what a business needs and restricting access to people with a reason to see it. You can also restrict access within the data room, as described in 8020 Consulting’s data-room guidance. Before a qualified buyer receives identifying records, have counsel review the nondisclosure terms, state requirements, and your enrollment and privacy documents. Restrict access to the buyer’s approved reviewers, especially if the buyer operates nearby centers.
Ask the buyer for a written plan covering director retention, staff communication, and family notification. You can negotiate when staff and families hear about a proposed sale, who delivers the message, and what the buyer can say about jobs and program continuity. Treat those plans as proposed commitments, not promises that every director will stay or that families will wait until closing to hear about the deal.
When to consider a limited market check before exclusivity
A limited, confidential market check can help you assess an offer when its major terms remain open. If the buyer has not shown how it will fund the purchase, ties substantial payment to an earnout, or leaves property terms unresolved, consider approaching a small group of qualified buyers before committing to one. Compare their plans for director continuity and approvals at each center alongside their proposed price. A market check may produce no stronger offer.
You may prefer to negotiate directly if the buyer has shown how it will fund the deal, understands your centers, and offers terms you prefer. Even a narrow market check shares information with more people. If protecting staff and family confidentiality or moving promptly matters most to you, negotiating with a preferred buyer can be a reasonable choice.
If you grant exclusivity, ask your lawyer to negotiate an expiration date and terms that require your written agreement to extend it. Exclusivity in a letter of intent limits your ability to discuss a sale with other buyers during that period. You can also propose checkpoints for funding evidence and a site-by-site approval plan. Set a checkpoint for due diligence, which is the buyer’s review of your financial records, operations, and contracts. the authors’ guidance for sellers cautions against automatic extensions and recommends resolving major economic terms before pausing competing discussions. Set the timetable around your buyer’s financing and your programs’ approval needs rather than assuming a standard period will fit.
Putting it together before you respond to the buyer
If funding or a center’s operating approvals remain unclear, ask the buyer to resolve those points before granting exclusivity. You can then decide whether to negotiate directly or make a limited, confidential market check. If selling now does not fit your plans, use the sale readiness guide to identify work you could do before approaching buyers.
Salt Creek Advisory works directly with owners to evaluate offers, buyer funding, and market alternatives. For standard M&A engagements, we charge a fee upon a successful transaction rather than an upfront retainer. If you have an offer, schedule a confidential conversation with Jack and Connor about its specific terms.
FAQs
- Does signing a letter of intent mean the sale is final? No. A letter of intent, or LOI, sets out proposed deal terms and does not itself complete the sale. Some provisions, including confidentiality and exclusivity, may still be binding. Have your attorney review those provisions before you sign, as the authors’ guidance for sellers recommends.
- How long do license and subsidy approvals take? Approval times vary by state and program. Before agreeing to a closing date, ask each licensing authority and subsidy administrator what the buyer must submit, who may operate during review, and when payments can continue.
- What happens to prepaid tuition and family deposits? Your agreement must say who takes responsibility for future care and how the related funds affect the closing payment. The treatment may differ for tuition paid in advance, refundable deposits, and subsidy receivables, so ask your accountant and attorney to review each category.
- Can the buyer let the director go after closing? A buyer’s ability to do so depends on the director’s agreements and applicable employment rules. If keeping the director matters to you, ask the buyer for a written retention plan and confirm how any change would affect site staffing and licensing.
Sources
- Jeremy D. Glaser and Stephen M. Callegari, “Seller Considerations When Negotiating a Letter of Intent,” April 9, 2025.
- Washington State Legislature, “WAC §110-300-0011, License transfers,” effective November 8, 2020.
- Federal Trade Commission, “Protecting Personal Information: A Guide for Business,” October 2016.
- Matt Kim-Perek, 8020 Consulting, “Best Practices for Your Data Room in M&A,” February 25, 2020.