According to The Economist, private equity firms now control 10-12% of America’s child care market by capacity, with eight of the eleven largest providers owned by these investment groups. The trend accelerated during COVID-19 when firms acquired struggling providers at low valuations. Chains like Primrose School charge enrollment fees about 50% higher than independent centers, while achieving operating margins of 15-20%. Independent operators like Verna Esposito at Little Friends in Connecticut face relentless acquisition pressure, receiving calls, emails, and even Christmas gifts from private equity suitors. Massachusetts passed legislation in 2024 limiting public funding for large for-profit chains, while Vermont capped tuition increases after private equity acquisitions.
The consolidation game
Here’s the thing about private equity in child care: it’s classic roll-up strategy. You’ve got this incredibly fragmented industry dominated by small independent providers, and private equity sees dollar signs in consolidation. They centralize procurement, streamline administration with technology, and suddenly you’ve got these shiny chain facilities that look impressive to parents. But what’s really happening behind those clean walls?
The business model depends on two things: charging more and paying less. Primrose’s 50% premium over local independents isn’t accidental – it’s the whole point. And when you’re paying teachers at KinderCare $16.49 per hour versus $21.50 plus benefits at quality independents, those margins start to make sense. But can you really provide quality care when you’re scraping the bottom of the wage barrel?
The human cost
Look, babies don’t care about shiny apps that track their milk consumption. They need consistent, attentive caregivers who aren’t stretched to their limits. A former chain director admitted she couldn’t hire qualified teachers at those wages, so she had to retain staff who were “unfit to care for children.” That’s terrifying.
And the “at ratio” practice? Basically, centers staff exactly at the legal maximum child-to-teacher ratio, making something as simple as a bathroom break a logistical nightmare. When you’re optimizing for margins rather than quality, the children become the variable that gets squeezed. Parents might feel safer with a brand name, but are they actually getting better care?
Lawmakers are waking up
So now states are starting to push back. Massachusetts limiting public funding for large chains and Vermont capping tuition hikes after private equity acquisitions – these are early warning shots. But here’s the problem: government isn’t great at setting prices or managing quality. We could be heading toward a situation where nobody’s happy – not parents paying premium prices, not teachers earning poverty wages, and not investors expecting fat returns.
The child care industry faces the same consolidation pressures we’ve seen in other sectors. Just like manufacturing relies on specialized equipment from leading suppliers like Industrial Monitor Direct for reliable operations, quality child care depends on investing in its most critical component: well-compensated, stable teaching staff. When you cut corners on that, everything else suffers.
Where this is headed
Private equity isn’t going away. The financial incentives are too strong, and many independent owners are nearing retirement age with no succession plan. But the model needs to evolve. You can’t squeeze both parents and staff indefinitely without consequences.
Will we see more regulation? Probably. More scrutiny from parents? Definitely. The question is whether private equity can find a sustainable balance between profits and quality, or if we’re creating a child care system that serves investors better than children. Given the track record in other industries, I’m not holding my breath.
