Abc Learning Case Study

ABC Learning a was the largest company operating children’s learning and long day care centres across Australia as well as centres in the United States and New Zealand. In addition, the company had ambitions to branch into the Canadian market. ABC started with a single childcare centre in Brisbane, in 1988. After strong growth, domestically and internationally largely achieved by acquisitions often purchased at inflated prices; ABC underwent a tumultuous period exemplified by a sharp fall in its share price (Mcgrath,Nicol, 2016). This was the result of an unsustainable level of secured and unsecured debt, a loss of control over cash flow resulting from unprofitable operations and an aggressive acquisitions policy; as a consequence, Receivers

The Company operated 18 centres by 1997; it was listed on the Australian Stock Exchange in March 2001, after which ABC Learning underwent phenomenal growth (Rush & Downie, 2006, p. 7). For the 2005 financial year it had revenues in Australia and New Zealand totalling nearly $300 million and controlled 20 per cent of the child care market in Australia (ABC Learning Annual Report 2005 as cited by Rush and Downie, 2006, p.13) before the company ultimately collapsed in November of 2008 (Butler, 2016). A number of factors such as the over 40% increase in children between one and four years enrolling in childcare during the years 1999 to 2005 were responsible for this (ABS 2000, p. 12; ABS 2006, p. 14 as cited by Rush and Downy, p.14). A pivotal factor in ABC’s early success was the Howard Governments, institution of a variety of initiatives including the baby bonus (IBIS World, 2011, pp. 4-5).The Federal Government used the Child Care Benefit, to subsidize childcare, by paying the benefit to parents (Rush & Downie, 2006). The Child Care Benefit support payment, also acted as an indirect subsidy to child care providers, who ultimately received this funding (Rush & Downie, 2006, p. 2). An estimated $206 million was paid to ABC Learning in 2005-2006 (Rush & Downie, 2006, p.

In fact, up to 40% of the company’s revenue was provided by subsidies in some years (Keane, 2008). In addition, the early nineties beginning with the Hawke government have seen the free market for profit business based model, become preeminent in the childcare industry (Brennan, 2008). The traditional community based model was pushed into a minor role (Brennan, 2008). This process was boosted under the Howard Government; with the abandoning of plans to increase the not for profit sector and the ending of subsidies to the non-profit community sector based care (Brennan, 2008). Resulting in the closure of many community-based childcare centres and pressure on local governments, and other funding bodies intensified resulting in many of them abandoning the area (Brennan, 2008).The 1997, decision of the Howard Government to change the child care subsidy to direct payments to families, opened new possibilities for growth in the industry(Brennan, 2008).These factors were the main drivers in ABC’s growth and acquisitions in the years following 2001 which will be discussed