Non-profit takeover of for-profit business marks paradigm shift in social enterprise

Non-profit takeover of for-profit business marks paradigm shift in social enterprise

News

The acquisition of a large scale for-profit early childcare provision company by a non-profit organisation GoodStart Ltd, the first deal of its kind in Australia, is challenging conventional thought in the sector and could serve as a blueprint for new investment models in the future.

GoodStart Ltd, a mission-led cross-sector, non-profit syndicate organisation put in a  winning bid – rumoured to be around AU$100m (£60.2m) - for 678 ABC Learning Centres, which was carrying AU$1.2bn (£722M) worth of debt when it fell victim to the global financial crisis in late 2008.

GoodStart Limited is backed by a number of investors and philanthropists including Mission Australia, Brotherhood of St Laurence, Benevolent Society and Social Ventures Australia. The individuals who contributed included numerous well-known philanthropists including Robin Crawford, a founding director of Macquarie Bank, Seek founder Matthew Rockman, and former Microsoft boss Daniel Petre.

Australian social visionary Michael Traill, founder of Social Ventures Australia and former private equity titan, explains the deal is important for three reasons.

He says it provides evidence that social capital providers represent the emergence of a new financial asset class; it shows the individual philanthropists behind GoodStart are prepared to accept reasonable commercial returns below conventional market rates provided there is clear evidence of social impact and also that GoodStart represents a new model of collaboration and partnership that ensure the blend of business and nonprofit sector skills, capital access, government funding and policy engagement. “These collaborative models are essential to build large scale innovative organisations that can address entrenched social policy issues,” he says.

Phil Hayes-St Clair, CEO of Australian-based philanthropy advisors HSC and company, who has documented the paradigm-shifting deal in a comprehensive case study (which can be downloaded at the end of this article) says, “Social entrepreneurs (be they within the non profit sector, philanthropy, or government) should examine this model as a means to thinking differently about 'how to organise and fund' mission driven initiatives.”