Key Takeaways
- • Private equity-backed childcare providers in the US charge substantially higher fees than non-PE providers and are significantly less likely to accept subsidised children or offer financial assistance, according to research covering 1997-2024 by academics from the University of South Carolina and Arizona State University.
- • PE employment concentration in US centre-based childcare grew from less than 1% in 1997 to approximately 9% by 2010, then stabilised at just under 10% by 2024, indicating a plateau in market penetration despite continued industry consolidation activity.
- • Private equity has established meaningful market presence in Australia's childcare sector alongside publicly listed companies, multinationals, not-for-profits, and independent operators, raising policy questions around affordability, workforce conditions, transparency, and use of government funding as public investment in early learning expands.
- • Childcare attracts PE capital due to its essential service status, recurring demand, and substantial government funding support—characteristics that create predictable revenue streams despite operational complexity and labour intensity.
Summary
A major US research study examining private equity's influence on the childcare market reveals significant structural differences between PE-backed providers and traditional operators, with direct implications for Australia's rapidly consolidating early childhood education and care sector. The working paper "Big Daycare: The Growth of Private Equity in the U.S. Child Care Market," authored by Jessica H. Brown (University of South Carolina) and Chris M. Herbst (Arizona State University), analysed comprehensive business records, investment data, provider surveys, licensing information, and accreditation records spanning 1997 to 2024.
The research documents a steady increase in PE concentration through 2010, when private equity-backed providers employed approximately 9% of the US centre-based childcare workforce, rising from less than 1% in 1997. However, growth has plateaued since 2010, with PE-backed providers maintaining roughly 10% market employment share through 2024. Most significantly, the study found that PE-backed childcare services charge materially higher fees than non-PE competitors and demonstrate substantially lower propensity to enrol subsidised children or provide financial assistance to families—a finding that contradicts the sector's characterisation as serving essential community needs.
The structural shift toward private equity ownership reflects the sector's appeal to institutional investors: childcare operates as an essential service with sustained demand, recurring revenue from government funding programmes, and substantial parental co-payments. These characteristics create predictable cash flows that justify acquisition multiples despite the sector's operational challenges, including high labour costs and regulatory complexity.
For Australia, where private equity already maintains a meaningful footprint alongside publicly listed operators, multinational providers, large not-for-profit organisations, and independent services, these US findings raise material governance questions. As Australian governments expand public investment in early learning provision, policy frameworks addressing ownership transparency, fee structures, workforce conditions, and the allocation of public subsidies have become increasingly critical. The evidence from the US market suggests that PE consolidation may create divergent incentive structures between investor returns and affordability or accessibility outcomes for disadvantaged families.
The research documents a steady increase in PE concentration through 2010, when private equity-backed providers employed approximately 9% of the US centre-based childcare workforce, rising from less than 1% in 1997. However, growth has plateaued since 2010, with PE-backed providers maintaining roughly 10% market employment share through 2024. Most significantly, the study found that PE-backed childcare services charge materially higher fees than non-PE competitors and demonstrate substantially lower propensity to enrol subsidised children or provide financial assistance to families—a finding that contradicts the sector's characterisation as serving essential community needs.
The structural shift toward private equity ownership reflects the sector's appeal to institutional investors: childcare operates as an essential service with sustained demand, recurring revenue from government funding programmes, and substantial parental co-payments. These characteristics create predictable cash flows that justify acquisition multiples despite the sector's operational challenges, including high labour costs and regulatory complexity.
For Australia, where private equity already maintains a meaningful footprint alongside publicly listed operators, multinational providers, large not-for-profit organisations, and independent services, these US findings raise material governance questions. As Australian governments expand public investment in early learning provision, policy frameworks addressing ownership transparency, fee structures, workforce conditions, and the allocation of public subsidies have become increasingly critical. The evidence from the US market suggests that PE consolidation may create divergent incentive structures between investor returns and affordability or accessibility outcomes for disadvantaged families.
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