Why Many School Sales Undershoot Their Value
I recently watched another established K-12 private school sell for nearly 30% less than it should have.
The owner—an outstanding educator and respected community leader—made a familiar mistake: they treated the sale of their school like selling a typical business. But selling a private school is not like selling a manufacturing company or a retail chain. It involves mission, compliance, accreditation, real estate complexity, and community stewardship.
After four decades advising on private school mergers and acquisitions (M&A) across Canada and the United States, I have observed this pattern too often. Great schools with waitlists and respected brands leave millions on the table because they go to market unprepared, approach the wrong buyers, and fail to create the competitive tension required to maximize value.
And today’s buyers—strategic school groups, family offices, and private equity platforms—are sophisticated. They know exactly what they’re looking for, and they can spot a poorly positioned sale from a mile away.
Where Private Schools Lose Value
The “friend of a friend” approach
Testing the waters quietly with one or two buyers can erode leverage. Schools need a structured process with clear timelines.
Weak or messy financials
Unreconciled tuition, deferred revenue, and unclear working capital create valuation discounts or re-trades late in the process.
Facilities treated as an afterthought
Zoning, capacity limits, deferred maintenance, and expansion rights can significantly impact buyer interest. Real estate is not secondary—it’s a core value lever.
Amateur positioning
A simple PowerPoint or brochure will not convince institutional buyers. They expect robust, data-backed materials that withstand due diligence.
What Sophisticated Buyers Actually Pay For
Enrollment durability: five-year retention trends, yield analysis, waitlist strength, and market catchment.
Program quality: measurable academic outcomes, accreditations, inspection reports, and university placements.
Leadership and governance: depth beyond the founder, succession planning, compensation normalization, and board oversight.
Compliance integrity: clean audits, licensing, child protection, health and safety, data privacy, and immigration compliance for international students.
Margin profile and scalability: normalized EBITDA plus credible growth initiatives (new seats, program extensions, auxiliary revenue).
Real estate flexibility: owned campuses with expansion rights, secure long-term leases, or sale-leaseback options that open the buyer pool.
How We Build a Defensible Premium
1. Exit Readiness and Valuation Bridge
We prepare a clear, defensible earnings story buyers can trust:
Reconciling tuition revenue and deferred income
Normalizing EBITDA (adjusting for owner compensation, related-party rent, non-recurring costs, etc.)
Establishing the correct working capital peg to avoid value erosion
Separating maintenance from growth capex to prevent buyer discounts
2. Enrollment and Program Analytics
We transform your narrative into evidence:
Cohort-level retention and yield analysis
Net tuition per student by program
Contribution margin by division and faculty load
International mix, policy exposure, and pipeline strength
3. Real Estate as a Value Lever
Facilities can significantly impact valuation:
Zoning and expansion capacity
Sale-leaseback modelling to widen buyer interest.
Capital planning, compliance reports, and accessibility status
4. Institutional-Grade Marketing Materials
Buyers expect professional documentation:
An anonymized teaser to protect confidentiality
A comprehensive Confidential Information Memorandum (CIM)
A structured data room covering corporate, financial, HR, compliance, and facilities
A management presentation designed for buyer underwriting models
5. Buyer Universe and Competitive Tension
We don’t “shop” a school—we choreograph the process:
Mapping strategics, education groups, financial sponsors, and family offices
Running the IOI and LOI phases with disciplined timelines
Optimizing structure, not just price: cash at close, rollover equity, or selective earnouts
6. Negotiating Beyond Price
Legacy and value must align:
Staff retention and leadership transition plans
Tuition and scholarship commitments for families
Protecting brand, mission, and community ethos
Investment schedules and advisory roles post-close
7. Risk Management to Keep Deals Closed
We minimize late-stage surprises:
Buyer-grade Quality of Earnings and tax diligence pre-market
RWI (Reps & Warranties Insurance) readiness with clean disclosures
Managing accreditation and regulatory approvals
Confidential communication planning for staff, parents, and donors
Typical Sale Timeline
Weeks 0–4: Exit readiness, valuation bridge, CIM, and data room build
Weeks 5–7: IOIs from targeted buyer set
Weeks 8–10: Management meetings and refined access
Weeks 11–12: LOIs with structure and diligence terms
Weeks 13–18: Confirmatory diligence, RWI, definitive agreements, and close
This roadmap flexes around academic calendars, accreditation cycles, and real estate milestones.
Indicators That Command a Premium Valuation
Enrollment resilience in both strong and weak economies
Demonstrable waitlists and disciplined yield management
Leadership bench depth beyond the founder
Clean compliance record and proactive corrective measures
Facilities with expansion potential or low ongoing capex needs
Credible growth strategies with realistic underwriting
FAQs From School Owners
Should we tell staff and parents early?
Not until you control the narrative. Staged communications protect confidentiality until there is certainty.
Will buyers change our mission?
Not if appropriately negotiated. We often secure covenants and investment commitments to preserve ethos and brand.
Do we have to sell the real estate?
Not always. Options include holding, selling, or structuring a sale-leaseback, depending on your goals.
What about earnouts?
We use them only when they truly align incentives. A strong cash price at closing should remain the foundation.
Why Timing Matters
Buyers' appetite for K-12 private schools in Canada and the U.S. is strong, but cycles shift. Capital is patient but selective. Owners who prepare early achieve smoother processes, stronger terms, and higher multiples.
A well-run sale delivers:
Multiple offers, not just one handshake deal
Leadership transition terms that work for the owner
Long-term investment in facilities and programs
Minimal disruption to school life
Premium valuations that reflect the school’s true worth
Your Next Move
You built something exceptional. Your exit should reflect that.
If you’re considering succession or a confidential sale within the next 6–18 months, we can conduct a no-obligation valuation and readiness review tailored to your school’s specific position and goals.
Douglas Halladay, President
Halladay Education Group
📞 1-800-687-1492 | 💬 WhatsApp: 604-868-0002 | 🟢 WeChat: dhalladay