Buyout includes millions of dollars in fees and $850 million in new debt

On May 7, 2008, shareholders approved the sale of Bright Horizons Family Solutions to the private equity giant Bain Capital Partners, and two weeks later it was finalized. The $1.3 billion buyout includes more than 600 centers serving over 70,000 children.

Debt. We see that word in the headlines day after day: personal debt, national debt, corporate debt. Private equity firms saddle the companies they buy with hundreds of millions of dollars of debt that’s how they make their money.  For example, Bain Capital walked away from the KB Toys buyout with a 370 percent return on their investment.

Meanwhile, KB Toys filed for bankruptcy just four years after it was bought out by Bain Capital.

Several companies have gone bankrupt following a buyout.  From the Wall Street Journal blog, Deal Journal: “Many of the companies have fallen victim to too much debt.” And it is for this reason that SEIU — along with parents, child care advocates and community groups — is very concerned about the implications of the Bright Horizons buyout.

The amount of new debt Bain Capital added to Bright Horizons’ books equates to 21 times the child care company’s annual profit.

To put it in “real people” terms, let’s say a household brings in $50,000/year.  After the bills are paid, groceries bought, taxes paid, etc., they have $5,000 left. And then they go and charge an additional $105,000 to their credit cards. 

Given the level of new debt Bright Horizons has been saddled with, we are concerned that centers will be closed and staff let go — despite reassurances from management.

Parents and staff deserve to know what changes Bain Capital is planning for Bright Horizons. Tell them to put kids first.