Kick private equity out of youth care

The sector is such a popular target for these locust capitalists because of the good chances of high returns

By: Lilian Marijnissen and Peter Kwint

Our youth services are not doing well. In recent years – after a decentralization under Rutte-2 that was accompanied by a major cutback – youth care has become more expensive, waiting lists have grown and the staff shortage has increased. Half of all newly trained youth care workers will leave the sector within two years. The youth care workers will go on strike next Monday, in protest against the increasing workload and the rapidly growing staff shortage.

Nevertheless, the sector is very popular in some places. Private equity funds – so-called springcock capitalists or venture capitalists, depending on who you ask – see youth care as 'an interesting growth market'. For example, the mental health organization Mentaal Beter recently fell into the hands of the French investment company Apax. Another provider was taken over by Holland Capital. Apax owns companies worth a billion or 50. They owned De Persgroep, Tommy Hilfiger and the software company Exact. Clearly people with a passion for youth care. The fact that they use youth care as a profit model is not a natural phenomenon, but a consequence of allowing the market in youth care. We also see this happening in elderly care and childcare, where private equity is now the order of the day.

The earnings model of these looters roughly consists of three possibilities. You can buy a company with borrowed money, hang that debt on the company, sell profitable parts and bankrupt the rest, you can add as much value as possible to a company in the short term and then sell it for a profit, or you can skim dividends , briefly summarized. You can find all kinds of things about that and we have previously seen at V&D and childcare organization Estro what consequences this can have.

But it shouldn't even be part of the debate in a civilized country, whether private equity has a place in youth care. Because whether a youth care institution is loaded with debts, pushed to grow as much as possible in the short term or to make a profit or to pay out a maximum dividend, it is all not in the best interest of the child.

Thanks to research by Follow The Money, we already have the first picture of the influence of private equity on youth care. For example, Mentaal Beter Cure made a profit of 9 million euros when the umbrella company made a loss of 6 million euros. And the umbrella organization had an outstanding private equity loan at an interest rate of 8%. This while the average interest rate at that time was 2.9%. In this way, the fund has raked in 2.3 million in interest. APAX has filled Mentaal Beter with 100 million in debt, with which a mental health institution has been purchased. And practitioners had to spend 95% of their hours billable, well over 20% more than usual. Staff turnover increased sharply while the board of the fund brought in tons.

The sector is such a popular target for these locust capitalists because of the good opportunities for high returns, as the example above also shows. But why do we accept that this care paid by all of us is a revenue model for foreign investment funds? That money is infinitely better spent on getting rid of waiting lists in youth care, improving the working conditions of employees and attracting new staff in a sector where we are short of tens of thousands of people.

On Monday, the House will debate how young people in the Netherlands are doing. There will be a lot of discussion there and we will not agree on everything. But what we sincerely hope is that we can at least agree on a simple starting point: the needs of a child are not a revenue model, kick that private equity out of youth care.

SP party leader Lilian Marijnissen SP Member of Parliament Peter Kwint

t