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Highlights
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Today eight out of the eleven largest day care companies in the United States are owned by private equity.
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One of the primary ways that private equity is able to squeeze profit out of childcare — a historically unprofitable institution — is by maximizing enrollment. The more kids you enroll, the more tuition money comes in. And if you have just enough low-paid teachers to ensure you’re in compliance with state-mandated ratios, you can keep labor costs down. Private equity–owned day care centers also try to lower operational costs by, for example, “shifting daily cleaning responsibilities from outside companies to teachers” and reducing “the number of sheets of paper per day” they give to kids. With this model, private equity–owned day cares are able to turn profits of 15 to 20 percent.
✏️ How private equity squeezes a profit out of daycare. 🔗 View Highlight
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the CEO of KinderCare, one of the largest childcare chains, made $2 million last year. Executives at KinderCare are also paid in equity or stock options, where those stock options “accrue depending on how much money the company returns to their private equity owners, Switzerland-based Partners Group.