How G8 Education rolled up 400+ childcare centres in seven years at around 4× EBIT, and why the shares fell from $4.60 to under $1 once the deals slowed.
G8 Education (ASX: GEM) is Australia's second largest childcare provider. It operates over 400 early learning centres under 21 different brands, serving tens of thousands of children weekly.
The company's growth strategy initially centred on aggressive acquisitions. G8 Education focused on buying existing profitable childcare centres at low earnings multiples, then improving their performance through standardised management and cost efficiencies.
Today, G8 Education remains a leading player in the childcare industry, though its expansion has slowed. It has shifted attention from large-scale acquisitions to optimising operations, improving quality of care, and selective strategic moves (such as niche service offerings) to drive organic growth.
Long-term investor returns have been mixed. G8 Education floated on the ASX in December 2007 at an issue price of $1.00 per share. The share price climbed to around $4.60 in mid-2014, before sector and company-specific challenges saw it retreat. In February 2026 the stock traded at roughly $0.64 per share, well below its 2014 peak.
February 2026, when this case study was first published. Figures and company status reflect information available at that date.
G8 Education was founded in 2006 by Chris Scott (originally under the name Early Learning Services). Chris Scott's vision was to build a premier provider of childcare services across Australasia.
Scott led the business through its early acquisition spree and served as Managing Director from 2010 to 2016, driving the consolidation strategy. He was instrumental in executing the rapid roll-up of childcare centres.
In December 2007, the company listed on the ASX (as Early Learning Services), providing initial capital to fund expansion. Over time, leadership transitioned to professional management; for example, Gary Carroll became CEO in 2017, followed by others, including the current CEO Pejman Okhovat.
The expansion was almost entirely driven by acquisitions of existing centres and childcare chains. The network grew from:
G8 generates revenue by providing early childhood education and care services. Parents (with support from government childcare subsidies) pay fees for infants and preschoolers to attend the company's centres.
With hundreds of centres, G8's income is essentially the aggregated fees from thousands of families, minus the costs of running those centres (staff wages, rent or property costs, educational supplies, etc). The business model is largely a volume and occupancy game: higher enrolment of children (up to each centre's licensed capacity) drives revenue, and maintaining efficient staffing and operations drives profit. G8 aims to offer high-quality childcare programs, which can justify healthy fee rates while leveraging its scale to keep costs per centre in check, thereby earning a margin.
Through acquisitions, G8 amassed a portfolio of childcare brands. It now operates centres under many brand names such as Kindy Patch Kids, Jellybeans, First Grammar and more, reflecting the many independent operators it acquired.
Acquisitions have been central to G8's business model as a growth engine. Rather than developing new centres from scratch (which can be slow and capital-intensive), G8 mostly bought existing centres that were already operating and generating profit.
The targets typically had a history of positive earnings and a stable enrolment base. Ideal targets were well regarded in their local community (high quality ratings and good reputation with parents) but could benefit from being part of a larger group. Geographically, G8 sought centres across Australia, often in growth corridors or areas with strong demand for childcare. The company did not limit itself to one brand or city; it was opportunistic across both metropolitan and regional locations. G8 often targeted clusters of centres to build density in certain areas (which helps with regional management efficiency and brand recognition).
G8 often purchased centres at about 4× EBIT (earnings before interest and tax), a relatively low multiple. Because G8's own stock traded at higher multiples (often 10–15× earnings in its high-growth phase), acquiring a business at 4× EBIT was instantly accretive to earnings.
Once a centre was acquired, G8 would integrate it into the group's platform. The company leveraged its scale to reduce costs and improve each centre's performance. For example, G8 could centralise administrative tasks (billing, payroll, procurement of supplies) instead of each small centre doing it independently, yielding cost savings.
G8 purchased centres under many brands and in many locations. As a result, G8 could reduce reliance on any single centre or market. This would smooth out regional demand fluctuations and local issues.
The overarching mandate for G8's acquisitions was to become the largest player in the childcare sector and achieve economies of scale.
G8 Education made over 200 acquisitions between 2010 and 2014 alone, spending hundreds of millions of dollars to build out its network. Deal size ranged from single-centre purchases (~$1–3m per centre) to large multi-centre packages, but always at relatively low EBIT multiples (~4×). The strategy was very successful in quickly capturing market share. However, by the mid-2010s the easy targets had been acquired and competition for remaining centres drove prices up, making further acquisitions less attractive.
After listing in late 2007 with 38 centres, G8 (then Early Learning Services) spent the next two years laying groundwork. It made a few small acquisitions to modestly expand its footprint. By the end of 2009, the company had around 40+ centres. These early acquisitions were often single centres or small groups in Queensland and New South Wales, establishing a base portfolio.
In March 2010, Early Learning Services merged with Payce Child Care Pty Ltd, which was a pivotal deal. This merger instantly grew the combined entity to 69 centres and prompted the rebranding to G8 Education Ltd. The Payce merger brought in experienced leadership (including Chris Scott as Managing Director) and set the stage for aggressive growth.
Immediately after, G8 acquired an additional 10 centres in April 2010, followed by 9 more in June and 2 more in July. By the middle of 2010, G8's network had expanded to roughly 90 centres. In the second half of 2010, G8 also struck a deal to acquire Kindy Patch, a prominent operator with 30 centres nationally; this acquisition closed around December 2010, pushing G8's total to about 120 centres. Also in late 2010, G8 announced plans to acquire Cherie Hearts in Singapore (18 owned centres plus 51 franchised centres) as its first foray overseas. By year-end 2010, G8 Education had grown more than threefold, an astonishing leap in scale within one year.
Continued roll-ups and a $34.5m capital raise in 2012 pushed the network to roughly 160+ centres nationwide. In 2013 G8 acquired around 61 centres (net), ending the year near 210 centres. The high point came in 2014 with the $228m acquisition of Sterling Early Education (91 centres), followed by additional bolt-ons. By late 2014 G8 operated about 440 centres (plus 37 contracted), held roughly 6.5% national market share, and reached a market cap of around $1.6bn, with shares peaking near $4.60.
A failed 2015 takeover bid for Affinity Education marked the end of aggressive large-scale M&A. Centre numbers hovered in the high 400s as management shifted focus to integration, selective tuck-in deals, occasional divestments, and limited greenfield openings rather than major portfolio acquisitions.
G8 exited Singapore in 2020, pruned underperforming centres, and made only one notable strategic acquisition (Leor in 2021). From 2023 onward the emphasis has been portfolio rationalisation rather than buying growth, including an attempted divestment of 31 centres. The group now operates roughly 400 centres, signalling a clear pivot from expansion to operational optimisation.
From the IPO onward, issuing new shares was a primary way G8 financed acquisitions. The company tapped equity markets multiple times during its growth phase. For example, in 2010 (shortly after the Payce merger) G8 raised about $18.9m via a share placement to institutional investors, explicitly to fund upcoming acquisitions. Similarly, in 2012 it raised roughly $34.5m to support the purchase of 16 centres, and in late 2013 it raised around $60m after agreeing to buy 29 centres. In total, G8 raised several hundred million dollars through equity issuances over the years.
The company's strategy was to raise equity in small chunks aligned with deals, rather than one enormous fundraising, thereby managing dilution and deploying funds quickly into earning assets. Investors were generally supportive, as each raise was accompanied by news of earnings-accretive acquisitions. G8 often structured these as private placements or rights issues at a slight discount to the market price, attracting both existing and new shareholders.
In addition to equity, G8 made use of debt to fund acquisitions, especially as it grew larger and had more stable cash flows. The company maintained bank loan facilities that could be drawn to pay for acquisitions quickly, then often partially refinanced by a subsequent equity raise. G8's debt strategy culminated in a notable transaction in 2014: it issued a $70m unsecured note (a form of corporate bond) to institutional investors.
G8 also expanded its bank facilities; by 2017 it had, for example, negotiated a new $200m debt facility, which provided flexibility for both acquisitions and general corporate purposes. The company was careful to keep its debt at reasonable levels; after each burst of acquisition, it sometimes used equity raises to pay down some debt and keep leverage in check.
Overall, G8's balance sheet management aimed not to overstretch. Childcare is a somewhat cyclical business (dependent on economic conditions and government subsidies), so they avoided taking on excessive debt that could strain the company in a downturn.
Many of G8's acquisitions involved creative payment structures that effectively acted as vendor financing. Often part of the purchase price was deferred for 12 months contingent on performance. This meant G8 didn't have to pay 100% upfront, reducing immediate capital needs. If the acquired centre performed well, G8 would typically pay the remainder out of the cash flow that the centre itself generated over that year, a self-funding mechanism. If performance lagged, the payout would be reduced, saving cash.
Throughout its history, G8 also used scrip payments, effectively using its shares as currency to pay sellers of childcare centres. This not only conserved cash but also tied the sellers' interests to the ongoing success of G8 (since they became shareholders). As a result of these many issuances, G8's share count grew significantly from 2007 to 2015, diluting ownership but ideally in exchange for higher total earnings.
The relentless acquisition strategy had a profound impact on G8 Education's financial performance, both in terms of explosive growth and later volatility.
Acquisitions made G8 Education a far larger and initially more profitable company, but also introduced complexities that later impacted financial stability. The business achieved the scale it sought, around $1bn in revenue, something impossible without M&A. Yet maintaining profit growth became a tougher task once the acquisition tap turned off. In recent years, G8's revenues are high but growth is low, and profits, while returned to positive, remain below the heights expected when everything was going full throttle.
Acquisitions drove a dramatic expansion in G8 Education's revenue following its 2007 listing at $1.00 per share. Revenue grew from a small base in the late 2000s to more than $200m by FY11, then accelerated through the heavy roll-up period. Following the $228m Sterling Early Education acquisition (91 centres) in 2014, revenue surged beyond $600m, reflecting the enlarged network of over 400 centres.
By FY22 revenue reached approximately $901m, and in FY24 G8 reported revenue of roughly $1.02bn, confirming the business had transitioned from a small consolidator to a billion-dollar operator. The 2007–2014 period delivered extremely high top-line growth rates, driven almost entirely by acquisitions rather than organic expansion.
Profitability rose strongly during the expansion phase. Net profit increased from approximately $14m in FY11 to over $50m by the mid-2010s, supported by acquiring centres at around 4× EBIT and improving operational efficiency post-integration. EBITDA margins during peak years were generally in the 18–22% range. However, margin pressure emerged in the late 2010s due to wage inflation, regulatory changes, oversupply in some markets and integration complexity.
In FY20, G8 reported a statutory net loss of approximately $189m, driven by wage underpayment provisions (around $80m+), asset impairments and COVID-19 disruption. The business subsequently stabilised and returned to profitability, reporting statutory net profit of approximately $67.7m in FY24, with more moderate margins than during the peak roll-up period.
G8 Education delivered strong dividends during its high-growth acquisition phase. Dividends commenced in 2010 and rose steadily as profits expanded, peaking at around 20 cents per share annually in the mid-2010s when earnings and margins were strongest. The stock was viewed as both a growth and income play. However, as occupancy pressures and cost inflation emerged, dividends were cut from 2017 onward and were suspended in 2020 following the $189m statutory loss linked to wage remediation and COVID disruption. Dividends have since resumed at a much more sustainable level, currently around 5 cents per share annually (7% trailing yield).
Share price performance has been volatile. The stock listed at $1.00 in 2007, climbed to around $4.60 in 2014 during the peak of the roll-up, then declined as growth slowed and operational issues surfaced. It fell below $1 during the pandemic and traded around $0.70 in 2025. An IPO investor would have seen limited capital appreciation, with total return largely dependent on dividends received over time, while investors who bought near the 2014 peak experienced significant capital losses.
Chart (bubbles): G8 Education share price at key points
Source: Deal Advisory analysis. Pandemic shown at $1.00; the shares traded below that level.
G8 showed that aggressive acquisitions can turn a small company into an industry leader in short order. By purchasing over 400 centres in a few years, G8 attained economies of scale and a top market position that would have been impossible organically. However, this only worked because G8 stayed disciplined on purchase price (paying ~4× EBIT) and stuck to what it knew (childcare centres).
One of the pitfalls G8 encountered was integrating so many acquisitions while maintaining service quality and operational consistency. The 2020 staff underpayment scandal is a prime example of integration gaps, likely stemming from multiple payroll systems and practices not being unified fast enough. Additionally, some centres' performance slipped post-acquisition, implying that simply owning them wasn't enough without active management.
G8's strategy thrived when industry conditions were stable, but when the childcare sector saw an oversupply of centres and increased regulations (higher staff ratios, wage requirements), G8's returns suffered. Occupancy declines meant some acquisitions didn't meet their earnings targets, and regulatory changes increased costs. These are factors largely outside a company's control.
In its heyday, G8 used financial engineering (accretive deals, debt, equity cycles) to drive up earnings and share price. This worked until it didn't. Once the acquisition pipeline slowed, the underlying business had to stand on its own, and growth stalled. Investors then reassessed the true sustainable earnings power of the company, leading to a significant share price re-rating downward. This strategy no longer works with the depressed share price.
G8 effectively leveraged its growing scale for a while: bulk procurement, centralised admin, and being the biggest gave it some competitive edge. It also explored adjacencies (like the Leor acquisition) to utilise its platform for new services. However, G8 perhaps could have paused earlier to consolidate its gains and optimise operations before chasing the next deal. This optimisation is currently occurring to bring the business back to a profitable position and restore the market's faith to drive up the share price.
G8 demonstrated how quickly scale can be built through acquisitions, growing from 38 centres at listing to more than 430 centres within seven years. But rapid expansion exposed operational strain, integration risk and earnings volatility, culminating in margin pressure and losses. The experience shows that investors ultimately reward sustainable earnings quality over headline growth. Occupancy stability, staff retention, cost control and compliance robustness proved more important in the long run than simply adding centres. A roll-up can create scale fast, but long-term value depends on how resilient and consistent the underlying earnings base becomes once acquisition momentum fades.
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