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Pricing questions as ABC Learning Centres probe continues

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Author: 
Walsh, Liam
Publication Date: 
19 Apr 2010
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EXCERPTS

As hearings into the collapse of ABC Learning Centres draw to their
close this week, more evidence may emerge of whether the
acquisition-hungry childcare operator unwittingly inflated prices for
centres it bought.

Testimony so far has given some credence to this issue of
pricing -- one that a childcare industry observer thinks is so critical
it helped fuel ABC's collapse in November 2008.

"Where did they go wrong? Let's not beat around the bush,
acquisitions," said Sean Collins, who was originally and ABC employee
and later worked independently to help acquire cengtres for ABC.

Mr Collins, writing on his website Collins Acquisitions, said
ABC had bought centres based on the amount of earnings they could
produce. But how ABC calculated earnings "just wasn't accurate at all".

He said that when a business had to acquire "in excess of
250-300 centres a year, with a market of probably 1000 centres that fit
the criteria, you take the lesser evil and buy (rather) than risk not
making the market's expectations".

....

Former director Larry Anthony said the board's main concern was
that ABC had been the main buyer in the market and thereby drove up
centre prices.

A pause could help prices become "more realistic", he said.

Ex-chairwoman Sallyanne Atkinson attributed the slowdown decision to housekeeping after a long expansion.

"I thought it was time to stand still, take stock," she said.

Former ABC chief executive Eddy Groves said the company had
pushed out its centre-acquisition pipeline in 2008 as a prudent savings
measure given the global financial crisis had erupted.

Mr Groves also stood by his stance that he never believed ABC
would go bust, and that dragged-out payments to creditors represented
ABC either verifying bills or trying to save money on interest by
delaying those payments.

....

The court this week is scheduled to hear from ABC chairman David
Ryan and executive director Martin Kemp, both of whom received a
sledging from Mr Groves in testimony last Wednesday about their roles
in the childcare operator.

- reprinted from the Courier Mail

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Entered Date: 
21 Apr 2010
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