Dutch childcare has changed dramatically over the past twenty years. Where it used to consist mainly of small, independent daycare centers (kinderdagverblijf/KDV) and after-school care (BSO) providers, large chains now dominate the landscape. Partou, CompaNanny, BLOS, Kibeo, and KinderRijk are names every parent knows. What is less visible: many of these organizations are owned by private equity funds that have acquired and merged multiple chains.
How did this come about?
Until the late 1990s, childcare in the Netherlands was provided almost entirely by foundations. That changed when the Kok government opened the sector to the market. The idea was simple: commercial parties would solve the shortage of childcare places. In 2005, the Childcare Act followed, whereby parents now paid for the care themselves and received compensation from the government through the childcare benefit (kinderopvangtoeslag).
This created an attractive market. Over 70 percent of costs are publicly financed, through taxes and employer premiums. For investors, this is interesting: guaranteed income, high demand, and low risk. Private equity stepped in, acquired small and medium-sized organizations, and built large chains. Currently, private equity holds approximately 12 percent of all childcare places in the Netherlands. In some municipalities, this share rises to more than 50 percent, leaving parents with little practical choice.
What exactly is private equity?
Private equity funds buy companies with money from investors and bank loans, with the aim of selling them on at a profit after a few years. This business model is therefore not about long-term quality, but about increasing company value. In childcare, this means: acquiring as many locations as possible, making them more efficient, and selling them on. Such a period typically lasts four to seven years.
A well-known example of what can go wrong is the bankruptcy of Estro in 2014. The American investor Providence had financed the acquisition with a loan of almost half a billion euros, and this debt was placed on the company. Estro had to pay fifteen percent interest, and that went wrong. Thousands of parents were left without childcare overnight.
Is private equity more expensive?
Yes, on average it is. Research shows that childcare owned by private equity is four to eight percent more expensive than at non-commercial providers. In addition, private equity chains raise their rates more aggressively when the government reimbursement increases. In other words: when the benefit goes up, the price goes up too, and the investor profits from public money.
Is the quality lower then?
This is more surprising. Research from the Erasmus School of Economics shows that locations owned by private equity have fewer violations on average during Municipal Health Service (GGD) inspections than smaller, independent providers. Administration is more often in order and legal requirements are better complied with. This is mainly due to economies of scale: large chains have a professional back office, central management, and more resources to meet regulations.
But there is an important caveat. The emotional and educational quality—how warm and stimulating the group environment is—hardly differs between private equity locations and other providers. And staff turnover at private equity companies is almost twice as high as at non-commercial organizations: 25 percent versus 15 percent. For young children, for whom familiar faces and a trusted environment are so important, this is a significant factor.
What does this mean for you as a parent?
The honest conclusion is that the picture is nuanced. A location belonging to a large private equity chain may be better than a small independent provider, but you will pay more for it. And the higher staff turnover can indeed impact the bond your child builds with the caregivers.
What you can do as a parent: look beyond the name above the door. Visit the location, ask questions about staff turnover, and read the GGD inspection report. This gives you a much more concrete picture than the ownership structure alone. On Kiddie.nl you can compare locations and view GGD reports, so you make a choice based on what you actually see and not just on the organization behind it.