Deal focus: Partners Group brings global expertise to Australian childcare

When Australian childcare provider Guardian Early Learning Group came up for sale in 2013, Partners Group lost out to Navis Capital Partners, which bought the asset from its previous owner Wolseley Private Equity at a valuation of A$120 million ($110 million). But Partners Group's interest in Guardian didn't fade; in fact, the longer it watched the company, the more attractive it became.

"The projection that management had provided at that point, they've beaten quite handsomely. And we've had a chance to keep in touch with them and to see the business evolve and grow, and to validate management's plan from those days," says Cyrus Driver, managing director and head of Asia private equity at Partners Group.

With a track record of backing childcare and education providers globally, the firm felt it was well-positioned to do business in Australia, where the structure of government support and regulation rewards established players and creates high barriers to entry for newcomers. Partners Group could be confident that its target for acquisition would have freedom to focus on offering high-quality services.

"As opposed to some markets in the world where anyone can open a childcare center, even with very poor standards, and then undercut those who are trying to provide genuine service, in Australia the rules of the game favor those who adhere to all the regulatory and quality requirements, and those who go above and beyond that," Driver says.

Having seen Guardian's capacity rise from 5,700 children per day in 2013 to more than 10,000, Partners Group was quick to enter the process when Navis put the company back up for sale. It bought a majority stake last month at a valuation of A$440 million.

The private equity firm now plans to bring its international childcare expertise to bear. Several new board members have been lined up, including a former executive from KinderCare who will advise on the development of new curriculum materials. The objective is to introduce a proprietary curriculum that sets Guardian apart from other learning centers. Partners Group will also support the company's physical growth plans. Construction of 10 new facilities was scheduled before the investment and now other greenfield projects will be accelerated.

The strategy for Guardian is part of a two-pronged approach. On one side, Partners Group looks for opportunities such as Guardian in sectors where it has global experience that can be leveraged. On the other, it seeks investments with a cross-border angle where it has an advantage over local competition. While Partners Group has made few investments in Australia so far, with growing maturity in the market it expects to build its presence there.

"We do see valuations improving in Australia," says Driver. "We see a more sober market from a seller's perspective, and therefore a healthier market for buyers. And we expect to grow our Australia portfolio quite substantially on the private equity side."

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• Topics
• Australasia
• Consumer
• Buyouts
• Trade sale
• Partners Group
• Navis Management
• Education
• buyout
• Exit
• Trade sale
• Australia