At first blush it looked like great news for investors in Australia’s largest listed childcare provider.
G8 Education shares more than doubled within hours on Thursday after the group revealed its warm welcome of a potential private equity offer at a 260 per cent premium to its record-low share price.
Like most of the kids in G8’s care, the suitor – Majority Capital Partners – is a newborn with little experience of the sector. It was set up just this year by Vidhur Rangaswamy, a veteran of John Wylie, and backed by rock-star investors like Will Vicars.
The 26¢ a share indicative cash offer, subject to further due diligence, contrasts with shares that had dropped from 70¢ at the start of the year to a low of 10¢ before the offer was revealed. Last year the stock was worth as much as $1.40.
That was before G8 revealed the scale of the challenges it faces with occupancy levels plunging, leading to the suspension of 40 underperforming centres that are not expected to reopen.
G8’s fortunes reflect a market landscape rocked by falling fertility rates, rising costs, and rising standards of care demanded by customers following the sex abuse scandals, which have hit commercial operators particularly hard.
As you would expect, G8 is not the only one to have suffered.
Just weeks ago, Shared Beginnings childcare collapsed after its owners, ASX-listed private lender Finexia, called in administrators.
Finexia got lumbered with the centres last year, thanks to its role as a lender to Genius childcare when it collapsed.
Genius and its boss, Gold Coast entrepreneur Darren Misquitta , got lumbered with many of these centres in 2023, when G8 Education paid it $26.5 million to take 31 struggling centres off its hands.
Outside of this G8 loop we have private-equity-owned Edge Early Learning, which went into voluntary administration in August with 70 centres.
Just last week, six centres were closed in South Australia and Victoria. Not-for-profit Goodstart had agreed to acquire them last month but these centres failed to pass due diligence.
It’s not a good sign when an operator built from the ashes of Australia’s largest for-profit childcare failure, ABC Learning, could not make these centres sustainable.
“As a not-for-profit we must make careful decisions about where we invest,” a spokesperson said.
“While Goodstart stands ready to make investments in extra staff, capital upgrades, and more professional development in those centres we are purchasing, some centres come with major difficulties which even extra investment will struggle to fix.”
The collapse of commercial operators is a growing trend.
Data extracted from the corporate regulator by not-for-profit social impact investment fund manager For Purpose Investment Partners (FPIP) shows 58 childcare centres collapsed between July 1 and October 11 this year.
This compares with 35 failures in the whole of the 2025/26 financial year, which was marred by the sex abuse scandals.
In less than four months we had more failures than any full year since ASIC started collecting information in 2021.
Of the 210 childcare companies that have failed since 2021, only four were not privately owned.
Perversely, this is where most of the new supply is coming from. Since 2022, more than 90 per cent of new centre approvals were privately owned.
But as a recent report from childcare think tank The Front Project (TFP) shows, it is the landlords who have been dictating terms. This has created oversupply and cannibalisation in lucrative areas, and childcare deserts in others.
“Right now, how big a centre is – and where it’s located – comes down to what it costs to build. Children’s needs barely come into it. That’s why some communities have no access to childcare and others have too much,” TFP chief executive Dr Caroline Croser-Barlow says.
The specialised needs of childcare centres – and the limit on competition due to the fact that markets are hyper-localised, restricting parent choices to a narrow geographic radius – have given developers the upper hand, while operators wear all the business risk.
“The risk of viability doesn’t sit with the people making the decisions when the property is built. It ends up with providers, families and governments. A handful of unviable leases can drag down a whole provider, and because the lease follows the business when it’s sold to the next provider, the impact can last for years,” Croser-Barlow says.
TFP is among those calling for an independent commission to oversee a sector that is failing to match services with demand, thanks to a model where the government hands billions to private operators and leaves the result to market forces.
Georgie Dent, head of advocacy group The Parenthood, says a clear picture is emerging of a funding model that has driven significant investment from listed companies, private equity and investors but with no management or oversight of where services are actually needed.
“[It] has really led us to the position where we are today, where we are seeing really significant closures,” Dent says.
The Parenthood says childcare provision needs to be put through the same lens as school provision and based on community needs, not market forces.
“We are not leaving it up to the market to determine which suburbs have got greater capacity to pay higher fees for school … We provide it because we recognise that public education is essential infrastructure.”
Former Macquarie executive Michael Traill, who is chair of FPIP, says the ownership model is also an important factor for sustainable quality care.
Traill, who helped set up Macquarie’s private equity business, understands the outsized returns demanded by PE and listed company owners that drive up costs and affordability issues.
His answer? Long-term ownership, ethically focused and capable of driving long-term ethical returns.
His “patient capital” model calls for super funds to play a bigger role, like Australian Ethical Super is in the aged care sector.
“They’re very long-term investors, so the objective is of owning these assets, running them with an emphasis on quality and inclusion, but driving a long long-term ethical return,” he says.
Traill says this funding model doesn’t just apply to childcare and should be welcomed by governments spending billions on these services.
“If you look at the sectors we’re talking about – aged care, early learning, social and affordable housing, social disability support for housing – they’re all areas where governments are very, very significant players in terms of the policy and funding it provides,” he says.
But Traill, who was instrumental in setting up Goodstart from the ABC Learning failure, also pointed to the split between ownership and operation of childcare centres as another issue to address.
Traill calls it a “natural tension” between the objectives of a landlord to maximise development profits and rent, and an operator for whom rents are such a significant component of costs.
“There’s a different skill set in developing and building childcare centres but, certainly, our view would be it’s easy to have alignment where you’ve got ownership of that under one entity.”
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