Private equity firms keen to sell childcare centres as costs rise

Childcare centres struggle to attract workers due to the low wages on offer. Picture: istock

Private equity firms are sitting on more than $2bn worth of childcare assets that they have been hoping to sell over the past two years because of staffing challenges, say sources.

Childcare centres struggle to attract workers due to the low wages on offer.

The government is making moves to remedy the problem, partly through a scheme to increase wages by 15 per cent. But qualifying for that scheme is not an easy exercise, according to those that own assets in the industry.

Sourcing staff from agencies means childcare centres are paying an additional 20 to 30 per cent, and many workers want short-term work, creating high industry churn.

If the cost of staff is more than 60 per cent of revenue for childcare companies they do not typically generate a profit.

Increasing fees only works if it happens across the industry, as parents move children to cheaper centres.

Quadrant Private Equity and Partners Group had their childcare businesses Affinity Education and Guardian Early Leaning on the market last year, but paused the sales and now look unlikely to come to market until at least 2025. The businesses are worth over $2bn combined.

Still, if there’s further reform to the industry, it is likely to improve the companies’ sales outcomes.

Another challenge selling in the current environment is determining just how much the centres are worth amid regulatory uncertainty.

Last year, the government requested that the Productivity Commission and the ACCC conduct a review of the industry, with a focus on costs and compliance.

The reports recommend that an activity test should be scrapped to help parents who currently lack access to childcare, which prevents them moving into employment.

Currently, getting a childcare subsidy requires proof of minimum work hours and/or training.

The findings recommend the subsidy be increased for low-income families from 2026..