Edleun Group Inc. is Canada’s first publicly traded child care corporation, which began trading on the TSX Venture Exchange in May 2010.
Quality, access and financing in for-profit child care have long been a concern in Canadian Early Childhood Education and Care (ECEC). But until now, most Canadian child care businesses have remained relatively small, privately-owned operations. During the past ten or fifteen years, ECEC in other countries (Australia, the US and the UK) has become dominated by corporate big box child care operations with the capacity for aggressive growth.
These child care operations provide graphic illustrations of issues, which arise when large corporate child care businesses play a dominant role….
What we’ve learned
No jurisdiction in which child care is treated as a private business has a track record of equitable access or high quality while the countries in which early childhood education and care is widely accessible and meets benchmarks for quality are those that have adopted public management, public funding and public/not-for-profit operation as fundamental. Canada can learn much from comparative policy analysis about other jurisdictions’ negative experiences with big-box corporate child care. And there is substantial information about the public, not-for-profit options that benefit children and families, not shareholders.
The growth of for-profit child care in Canada was the top concern for the National Child Care Working Group. The committee gathered in Ottawa November 22 –24 to examine ways to improve child care across Canada …
Early childhood education workers from across Canada warned that without a public system of early childhood education and care in Canada we won’t meet the needs of children and families.
“We are seeing too much growth in for-profit child care,” said Jamie Kass, co-chair of the committee. “We are very concerned about this trend because from our perspective, there is simply no place for profit making in child care.”…
“We know that quality affordable child care helps ease poverty, enables parents to enter the workforce and gives our children the best start in life, “ said Randi Gurholt-Seary, co-chair of the committee. “The problem is, too many families don’t have access to child care. Waiting lists are long, fees are too high and there is no system to guarantee access quality care.”
Child Care – A fast-growing company that went public in May on the TSX Venture Exchange announced a deal Tuesday to buy three Calgary child care facilities for $2.24 million, ….
The acquisition will add 283 licensed child care spaces to Edleun’s portfolio, increasing its total to 1,851 spaces in 20 centres that have been purchased or are in the process of being purchased. The company raised $40 million through two private placement offerings.
Today, 570 of the failed ABC centres will be transferred to the not-for-profit company GoodStart, a consortium that includes the charities Mission Australia and Brotherhood of St Laurence.
Taxpayers have lent GoodStart $15 million to help it buy the centres, through a seven-year federal government loan.
Childcare Minister Kate Ellis yesterday said the handover would increase the not-for-profit share of the childcare market from just over a quarter of the market to more than a third….
Childcare union the Liquor Hospitality and Miscellaneous Union yesterday welcomed the sale as “the end of a long and sad saga for childcare”.
LHMU assistant secretary Sue Lines said the new non-profit owners would be more stable than the listed ABC Learning, which collapsed with $1.6 billion in debts in November 2008, affecting more than 100,000 children and 13,000 workers in 1037 centres.
The Rudd Government copped some mild criticism last week for dumping its pre-election pledge to build more than 220 child-care centres. …It’s a shame, though, that the politics around Ms Ellis’s announcement was more discussed than the policy itself. …
[Ms Ellis] also argued that after Labor promised the extra centres, the collapse of ABC Learning had reshaped the industry. …
A more likely reason for the decision against building new centres is the changing nature of supply. The child-care sector’s rapid growth has attracted many businesses. An industry once run mostly by community groups is now dominated by private companies, which control three in four centres across Australia. Over time, they have demanded bigger subsidies to keep their fees affordable. It’s likely they have also lobbied against new centres, which would increase competition. Governments have complied, and taxpayers now foot up to half of the cost of child care. It’s a dangerous business model, as any future decision to cut these rebates could cripple exposed providers.
Perhaps it’s time for governments to stop treating child care as just another ”market”, to be guided by regulation and propped up with subsidies. …Child care is no longer a middle-class luxury; it is crucial to society.
This begs the question: should governments approach child care as they do schools? The consensus of educationalists is that early childhood learning experiences have a greater effect on a student’s future than primary or secondary school. Yet the public education system still reflects 20th-century thinking on when formal learning begins. Governments are the main provider of schools in Australia because they believe schooling is too important to be left entirely to the market. In contrast, only 3 per cent of child-care centres are government-owned and managed….
Laurie Monsebraaten, Social Justice Reporter
Toronto Star
Big-box child care is setting up shop in Canada and critics worry it will undermine quality, scuttle chances for a national daycare program and thwart provincial plans for all-day kindergarten.
The new company, Edleun Inc., has “identified a large and growing supply and demand imbalance” and is looking to acquire and develop “high quality” child care and early education centres across Canada, according to documents filed with the TSX.
Edleun already owns a chain of Alberta daycares with links to the failed Australian-based ABC Learning Centres. It has merged with a Montreal capital company and plans to begin trading on the TSX Venture Exchange…..
About 80 per cent of Canadian child care is not-for-profit, with a small number of public centres mostly operated by municipalities. The remaining commercial centres are either owner-operated daycares or small private chains run as community businesses.
A large international body of research has found that for-profit daycare provides lower quality care for young children than non-profit or public programs. Non-profit and public daycare are also more accessible and affordable for parents and more accountable to taxpayers, research shows.
“Once child care becomes a big business traded on the stock exchange, there isn’t even a pretense that it’s being operated for the love of children and families,” [Martha] Friendly said. “The stock exchange isn’t about public services; it’s about profit, pure and simple.”
Edleun Inc
June 4, 2010
According to a media release, Edleun’s goal is to “become the leading educational and child care provider in Canada. The Company’s objectives include the acquisition and improvement of existing child care centres and development of new child care centres across Canada.”
….in the past year there have been some new developments in policy and practice that have put Australia back on the childcare map.
The new Labour government …has paid much more attention to childcare. And the messy collapse of the corporate giant ABC Learning, which was the biggest operator …in Australia, has led to a rethink about the role of government and of the private sector in childcare.
Australia is a federal country. There are six states, each of which has its own constitution, has its own budget, and is in control of its own domestic affairs. There are also two mainland quasi-independent territories.
In terms of childcare there has been relatively little consistency. Levels of provision, requirements for trained staff, curricula, regulation and so on were all dealt with at a state level. ….
The Rudd government has strengthened the mechanisms for sorting out policy at a national level. The Council of Australian Governments (COAG) has the job of initiating, developing and monitoring the implementation of policy reforms that are of national significance.
In July 2009 COAG agreed to set up a National Early Childhood Development Strategy. The first part of the strategy, the National Quality Agenda for Early Childhood Education and Care, which applies throughout Australia, was agreed in December 2009. This is intended to create new quality standards, including higher staff-to-children ratios and better trained carers and early childhood teachers, with requirements phased in over the next decade. ….
LEARNING FRAMEWORK
COAG also agreed an early learning framework called Belonging, Being and
Becoming. This framework has five learning outcomes, illustrated by very
practical sets of examples:
– children have a strong sense of identity
– children are connected with and contribute to their world
– children have a strong sense of well-being….
This framework was the result of extensive negotiations with a very wide range of practitioners and academics,….
CORPORATE COLLAPSE
These national developments were given extra urgency by the …collapse of the corporate giant ABC Learning in November 2008, amidst accusations of poor financial management ….
ABC Learning ran over 1,000 centres in Australia, as well as having investments in a number of other countries, including the UK …The ABC share of the Australian market was so substantial that the Government could not let the centres themselves go under – too many nurseries faced closure.
It has taken the receivers over a year to sort through the business and to decide about the future of the nurseries. The government has bailed out well over A$100m to keep the nurseries open ….
Childcare workers and parents lobbied hard to have the nurseries taken under government control. A Senate committee, set up in the wake of the ABC failure, commented on ‘the deficiencies in childcare policy and regulation’ that led to the collapse. It recommended that small-scale or individual independent operators and not-for-profit and community-based organisations should provide services, rather than childcare being left entirely to the market.
As a result, the government has overhauled its regulations, but it has not changed its policy as much as many would like. Before demand-side funding (parent childcare subsidies through the tax system) was introduced, the previous system had been to give grants to community organisations providing childcare. The switch to demand-side funding had led to the growth of the private for-profit market and enabled the growth of ABC Learning. ….
Nurseries sold off
The Australian government continues to support demand-side funding, but it has intervened in the sale of the remaining ABC assets. Of the 1,000 or so ABC nurseries, about one quarter were deemed unviable by the receivers and sold off at peppercorn prices, mainly to non-profit organisations. The remaining 715 nurseries were put up for sale. ….
In the end there were only two …bidders – the private equity company ….and a charitable consortium branded as Good Start. The receivers, unsurprisingly, awarded the bid to Good Start.
The charitable consortium…. has borrowed money and tapped private philanthropists to help fund its bid. The centres will now be run as community-based, low-profit centres to help children from disadvantaged backgrounds, although they will also cater for working parents.
Investors will be paid below-market rates of return on their investments, with the rest of any profits from childcare fees ploughed back into the centres to improve the quality of service.
Can we learn any lessons from these turnabouts in Australian policy? First, in a recession, private for-profit nurseries are vulnerable. Second, corporate firms are problematic, particularly if they have taken on childcare as a speculative investment, because it takes time – and government money – to unravel their affairs if they go bankrupt. Third, even when they get into a mess, corporate firms are unlikely to be repentant. ….
Fair Trade model
One of the ideas being bandied about when I was in Australia recently was the notion of ‘Fair Trade’ nurseries.
Fair Trade goods are now a well-known idea. The Fair Trade movement favours small co-operative producers, who plough the profits back into the business in order to pay a fair wage to the workers rather than have profits extracted for shareholders or owners. …. Fair Trade is also synonymous with high quality and community involvement….
The lesson from Australia is that it has proved too risky, as well as morally repugnant, to make a profit out of children.
CHILDCARE regulation should be overhauled to remove the profit-driven problems leading to the massive collapse of the ABC Learning empire, a senate committee has found.
A 12-month inquiry into child care tabled in the Senate .. recommended the formation of a new national statutory body as part of an overhaul of the multibillion-dollar industry. The report was damning of the business approach taken by ABC Learning, whose collapse last year sparked the inquiry.
“That an organization catering for up to 25 per cent of the long-day care market should fail so rapidly following its rise to market dominance says as much about the deficiencies in childcare policy and regulation as it does about highly questionable business practices of the company,” the report found.
It recommended small-scale or individual independent operators and not-for-profit and community-based organizations as the best to provide services.
Media Release: LHMU [Liquor, Hospitality and Miscellaneous Workers Union]
AAP/ninemsn
Childcare union calls on Government to make this a happy anniversary by stepping in to protect standards at ABC Learning centres
On the first anniversary of ABC Learning going into receivership LHMU, the childcare union, has called on the Federal Government to ensure the remaining centres are sold to a reputable, quality operator.
On 6 November 2008 Receivers McGrathNicol were appointed to Australia’s largest privately owned childcare operator. One year later McGrathNicol are still at the helm of ABC Learning, making this the longest running receivership in Australian corporate history.
Sue Lines, LHMU Assistant National Secretary, says “After the anxiety of the past year, the last thing workers and families need is another ABC taking over the 705 centres the Receivers are selling on behalf of ABC Learning’s creditors, the big banks.
“Recent reports of the interested potential buyers do not alleviate concerns about what lies ahead. Mission Australia is in a consortium with 5 other not-for-profit organisations… and a little-known private equity group, ArcherCapital.
“A stable, reputable and quality operator is the priority for families and workers and it must also be the priority for governments to ensure childcare in Australia is operated in the interests of families and workers.
“This sale process highlights weaknesses in Australia’s childcare licensing regime under which licences to operate childcare centres are issued by state and territory governments. There are no national standards with which potential owners must comply in order to operate a childcare centre. This isn’t good enough.
“Australia’s childcare licensing regime must be strong enough to control and protect quality. It’s not appropriate for the big banks to decide behind closed doors who will control these centres, which represent 15% of Australia’s childcare sector, merely because they are ABC Learning’s major creditors.
“The stakes are too high for the Government to sit back and let the big banks decide short and long term outcomes for families and workers. They must step in now.
“Families value the commitment of the 13,000 childcare workers who have provided professional care and education for young children at ABC Learning centres throughout the past year despite the long, stressful months of uncertainty about the future of the centres and of their jobs.
“It’s time for the Government to again do the right thing by workers and families,” says Sue Lines.
THE receivers for ABC Learning, acting on behalf of banks owed $1 billion following the childcare operator’s collapse last year, are expected to formally begin the sale of the 715 viable centres as early as this week.
The receivers – lead by Chris Honey of McGrathNicol – have until March 31 to sell the remaining 715 childcare centres or face eviction….
However, the centres are expected to sell for less than $1 billion, and even the banks are not expected to get their money back….
ABC Learning is expected to finally be wound up at that meeting, which would open the way for legal action against the company’s former auditors and company executives, including former chief executive Eddy Groves. There could also be a challenge to the banks’ ranking above all other creditors in the queue for more than $1.6 billion….
EDDY Groves had promised his daughters he would take them to Disneyland for the Easter school holidays.
His travel plans alarmed the corporate watchdog, the Australian Securities & Investments Commission, which this week applied to the Federal Court to freeze the failed childcare entrepreneur’s assets and seize his passport…
The collapse threatened the closure of 1020 childcare centres – one in every five centres in Australia, caring for 120,000 children – and sparked a Senate inquiry into childcare.
Taxpayers have spent $56m to keep failed ABC centres running. More than 70 centres have closed and 220 have been sold to new operators….
…children should not be treated like commodities. “It is appalling that an essential service such as childcare has been placed in the same category as shopping for household goods, merely in an attempt to encourage parents to enrol their children back into ABC Learning centres.”
Should child care be at mercy of market? International herald Tribune – Business with Reuters – The Global Edition of the New York Times
By Meraiah Foley
November 28, 2008
…. The collapse of the company, which looks after about 120,000 Australian children, or 25 percent of the day care population, has sent the government scrambling to avoid the economic and political fallout of leaving tens of thousands of working parents stranded without child care services.
Critics say the rise and fall of ABC Learning will become a textbook case highlighting the dangers of allowing the private sector to dominate essential services like education, care for the elderly and utilities.
“This is not just an Australian story,” said Deborah Brennan, a social policy expert at the University of New South Wales, who has been studying ABC for the past 18 months.
“It is a story about where a rather blind belief in market forces can get you in the area of community services.”…
Women tolled warning bells but no one wanted to listen Sydney Morning Herald
Adele Horin
November 8, 2008
The women knew. For some time ABC Learning Centres had troubled the child-care experts. The company’s baffling balance sheets did not make sense and the labyrinthine company structures were a worry to them.
But no one took notice of a bunch of female child-care experts with degrees in early childhood education and politics. Critics were dismissed as ideologues and anti-business, and told they were picking on ABC. …
Community operators keen to step into ABC void ABC TV News
Nov 7, 2008
ABC Learning was placed into administration yesterday….
Lynne Wannan, the immediate past convenor of the National Association of Community Based Children’s Services, says it would be “foolish” to let the company return to its previous business model.
“It is extraordinary to imagine that they would ever have been able to see you could return shares to shareholders. So there was no other route for them than to end up like this,” she said.
“To imagine that you are ever going to have millions and billions of dollars t2o return to shareholders and banks based on the revenue that you get from childcare is ludicrous.”
…. “It is not a complex task to manage children’s centres and those community ones that have been operating for 30 to 40 years, they can do it. They manage. That is what they do on a day-to-day basis,” she said…
Receivers to take over ABC Learning The Australian
Nov 5, 2008
ABC Learning, the childcare centre operator that looks after 100,000 Australian infants and toddlers, is today expected to be swept into receivership after months of escalating financial trouble.
THE collapse of ABC Learning is an opportunity for the Rudd Government to rethink the fundamentals of Australian early education and care….
How did we get into this mess? Deputy Prime Minister Julia Gillard has blamed John Howard for “letting the market rip”, but it was the Hawke government, in 1991, that introduced market forces into the sector. It did this by extending child-care assistance to the users of for-profit care and then by changing the structure of Commonwealth funding to encourage private provision and marginalise the community sector.
Labor promised that the market would lead to greater choice and lower fees. It decreed that private businesses, not governments, should determine the location of services, even though huge public subsidies were involved. Under Labor’s system, there was no cap on the number of long day care centres that private operators could set up….
CUPE has released a legal opinion suggesting that if the federal and provincial governments don’t act fast, a company called “123 Busy Beavers” might make universal child care an impossibility.
The opinion – by noted trade lawyer Steven Shrybman examines NAFTA rules around public services and foreign investment. Paul Moist, Shrybman, National Child Care Advisory Committee Chair Shellie Bird, and Tracy Freitas, Early Childhood Educator and CUPE 2204 member, released the opinion at a press conference Apr. 1.
Canada has for-profit child care, but it’s mostly delivered by small businesses and individuals. There is little – if any – foreign investment.
That could change though, as a company with ties to Australian child care ABC Learning Centres has been buying up for-profit child care centres in Alberta, BC and Ontario.
And if the amount of for-profit child care delivery grows, and if the amount of foreign investment grows too, Shrybman argues, child care would be considered a commercial venture, rather than a “reserved” public service, under NAFTA.
Any new program – such as the national child care program envisioned in Bill C-303 or even the Ontario government’s plan for full-day kindergarden – could be considered a violation of the rights of the for-profit child care sectors’ investors.
A government that still wanted to proceed with a publicly-delivered child care program would have to pay damages to any foreign company whose profits were affected.
Shrybman argues the only way for the federal and provincial governments to preserve their right to create a public child care program is to use it.
“Once the door is opened to foreign investment in the child care sector, it may be impossible for governments to close it,” he argues.
This opinion builds on a 2004 legal opinion Shrybman produced on the former Liberal government’s plans for a national child care program.
Related articles:
Union report sounds alarm over foreign daycare chains; CUPE warns trade rules could be used to block universal public system TORONTO STAR
By: TONDA MACCHARLES
April 2, 2008
…. A legal opinion prepared for the Canadian Union of Public Employees, … warns there are risks if Ottawa does not limit foreign corporations – like Australia’s ABC Learning Centres Ltd. – from buying up small child-care operators in Alberta, B.C. and Ontario.
International trade lawyer Steven Shrybman says that under NAFTA rules, foreign investors, if they become significant players as daycare providers, would be able to challenge future “public policy” efforts by governments to regulate or expand child care.
… Right now, governments can limit or ban foreign investment in child care and “preserve future policy options,” he said. They can require a child-care centre to hire locally, provide service to a particular region as a condition of its licence, or ensure that parents and members of the local community comprise a majority of the board of directors.
But if federal and provincial governments do not exercise their right to regulate foreign corporations, those companies will be in a position to sue for damages if future government measures “impinge on those investments.” … “the prudent course for provincial governments would be to restrict foreign investment in the child-care sector,” said Shrybman.
“If they fail to do that, the future of child-care services in Canada may well be determined not by communities or by governments, but by private tribunals meeting behind closed-door meetings in proceedings at World Bank headquarters in Washington, because that’s where these disputes will be resolved.”….
NOT FOR SALE: PROMOTING PUBLIC SOLUTIONS IN TODAY’S ALBERTA Vue Weekly – Edmonton
SHANNON PHILLIPS
…. Privatization, says Moore-Kilgannon, is the “common thread at the root of so many problems …. Consistent through all these sectors is that they are under constant pressure—waiting lists, cutbacks, poorer quality of services.”
Moore-Kilgannon explains that privatization is part of a familiar cycle: governments reduce spending on public services, sometimes dramatically. The public sees a downturn in services, and demands change. The private sector—often massive multinational corporations—steps in to offer solutions. Those solutions are sold to the public as cheaper and more efficient.even though Moore-Kilgannon says the evidence most often shows they are neither.
Research has shown privatized health, child care and seniors’ services to be more expensive—both to individuals and to governments. A layer of profits has to be skimmed off the service for it to be a viable business venture, and those profits come from either cutting back on wages or quality or by raising fees.
Australian social policy researcher Deb Brennan, an expert on child care, says all of that and more has happened in her country…ABC built their business model upon government subsidies.
Australia used to fund child care as many other developed countries do: giving direct subsidies to non-profit and community-run centres. Now, they simply cut a cheque to parents, who are then able to “choose” the child care services they like best.
Non-profit centres have since all but disappeared, bought up by ABC and other for-profit ventures. Fees have gone up and wages for workers have stagnated. … Last year, ABC received $150 million (CAD) of taxpayers’ money.
Australia elected a new, more left-leaning federal government last fall, but Brennan says it’s made precious little difference in the government’s approach to child care.
“They’ve just announced the government will now cover 50 per cent of child care fees. That’s just an open invitation to for-profit operators to raise fees.”
Brennan says there are no rules constraining how much child care operators can charge. “It’s part of the philosophy of letting the market decide. But the quality and standards are very mixed for the cost.”
… She says Canadians need to take a hard look at market-based models, “to find out whether this model actually delivers high quality early learning and care services. In Australia, it doesn’t.”
…Just six months ago, a division of ABC bought 11 child care centres in Alberta, as the province has boosted Australia-style subsidies for parents. Called Busy Beaver Learning Centres, the ABC subsidiary had also been looking for more opportunities in BC and Ontario….
An education business in China has touted the name of Brisbane-based ABC Learning Centres to promote a bilingual “5-star” kindergarten venture – despite the childcare giant denying knowledge of the plan.
The proclamation came in an error-riddled online announcement from American TPR English School. The announcement was pulled following Courier-Mail queries and a Chinese news article.
“The (Chinese) claims are false and we are investigating,” ABC said.
The news comes weeks after a rapidly expanding ABC rejected claims of having operations outside Australia, New Zealand, the US and UK – and of being behind the Australian-backed 123 Global businesses….
The developments came after Canadian politicians and media claimed ABC was behind 123’s recent establishment of operations in the North American nation.
ABC and 123 rejected this and maintained they are separate businesses, although they have a series of ties for ventures including staff recruitment and centre acquisition….
ABC Acquisitions is now 123 Global. ABC Learning previously rejected Citigroup analyst doubts about ties between Learning and Acquisitions.
TPR highlighted links between Learning and Acquisitions but confused issues such as ownership….
Mr Jones, also a director of 123 Global Holdings (China), said a reference in the article to 123 being an ABC “subsidiary” was wrong.
Tom Mould, another 123 Global Holdings (China) director, was photographed signing the memorandum.
He is also listed as company secretary of Independent Colleges Australia, a non-profit schooling entity which has ABC executives Le Neve Groves and Martin Kemp on its board….
…. Chief executive Tim Boyle said the firm had good growth prospects for 2007/08.
“We’ve got a very strong corporate pipe and also we’ve got some strong prospects for property in the back end of 2008,” he said….
Austock’s property investment management business has surged in the past two years from just over $100 million to $675 million in funds under management at June 30 2007.
Much of that growth was driven by its management of property trusts leasing hundreds of childcare centres to the fast-growing ABC Learning Centres Ltd.
The childcare provider is now aiming at the US market ….
Straight Goods
by Ginette Petitpas-Taylor [Ginette Petitpas-Taylor, of Moncton, is Chairperson of the New Brunswick Advisory Council on the Status of Women.]
EXCERPT
It sounds like a joke, but some people are getting extremely rich providing child care services.
To New Brunswickers who have ever purchased or provided childcare — even those who have owned one of this province’s many for-profit daycares — that sounds incredible, even suspicious. How could you ever make a real profit, let alone get rich?
[If for-profit services to children made sense, we would let businesses organize our education system.]
How large corporations are doing it is by cutting costs and (according to some studies) cutting corners, and by subsidy milking — concentrating on regions where governments provide subsidies.
Many governments have immunized themselves against the practice. They say children’s interests don’t mix with profit making and so, they limit expansion of childcare services to the non-profit sector.
After all, if for-profit services to children made sense, we would let businesses organize our education system.
Apart from “How can you make a profit in that business?”, the more important question for a community and a government to answer is: “Do we want child care services whose first priority is to the shareholder, not the child?”
CHILDCARE giant ABC Learning Centres had tender processes questioned at a meeting where it talked up Labor’s federal election win and the possibility of a Democrat taking the White House….
Shareholder Jit Mau queried $74 million in untendered work given in fiscal 2006 to a maintenance and renovation company run by Mr Groves’ brother-in-law….
Mr Zullo and Mr Groves have co-invested in outside business. Land documents also show they bought and resold property to each other.
QMS’s work had been reported as a “related-party” transaction for years but ABC stopped publishing such details this year after realising there was no obligation to do so under revised accounting standards….
Mr Mau told Mr Groves to “take a cold shower, have a look at yourself in the mirror and ask yourself have you done the right thing”….
