The Rise and Fall of Abc Learning
The rise and fall of ABC Learning
Q1:
The aspects of the business strategy of ABC Learning resulted in increased business risk for the company including: the rapid expansion of market share, over-indebt, and blinding overseas investment.
Rapid expansion of market share: ABC, which at its peak had almost 2200 centres in four countries, also had a flawed strategy to handle significant and rapid growth. When A.B.C. Learning Centers listed on the stock exchange in March 2001, it was a tiny operation with a market capitalization of just $25m. But five years later that number is approaching $2.5bn as the company has quickly become Australia's leading operator of childcare centers. ABC pursued acquisition after acquisition – buying up as many existing centers as they could, and expanding their appetite by establishing more and more sites off the back of increasing debt. The company's acquisitions are getting larger so there is always a risk with this strategy that they will pay too much for a business or be unable to integrate it effectively. This meant that every new ABC sign that appeared on the horizon – equated to more and more debt. Ultimately ABC could no longer sustain their rapid expansion. With a falling share price and closer examination of their books it became clear ABC’s true value was significantly lower than previously thought.
Over-indebted: In 2005, in order to satisfy the expansion plan, raising capital for domestically and globally expansion was done through issuing shares to public. ABC borrowed an enormous amount of money from Australian big four banks: CBA, NAB, Westpac and ANZ). In the wake of the global financial crisis, it couldn’t refinance its huge debts, so the administrators were called in. In the end, ABC got too big for its own good, also made itself to the end.
Blinding oversea investment: After becoming the dominant player in the domestic market, ABC Learning has pursued an aggressive overseas expansion. The high levels of debt and
Q1:
The aspects of the business strategy of ABC Learning resulted in increased business risk for the company including: the rapid expansion of market share, over-indebt, and blinding overseas investment.
Rapid expansion of market share: ABC, which at its peak had almost 2200 centres in four countries, also had a flawed strategy to handle significant and rapid growth. When A.B.C. Learning Centers listed on the stock exchange in March 2001, it was a tiny operation with a market capitalization of just $25m. But five years later that number is approaching $2.5bn as the company has quickly become Australia's leading operator of childcare centers. ABC pursued acquisition after acquisition – buying up as many existing centers as they could, and expanding their appetite by establishing more and more sites off the back of increasing debt. The company's acquisitions are getting larger so there is always a risk with this strategy that they will pay too much for a business or be unable to integrate it effectively. This meant that every new ABC sign that appeared on the horizon – equated to more and more debt. Ultimately ABC could no longer sustain their rapid expansion. With a falling share price and closer examination of their books it became clear ABC’s true value was significantly lower than previously thought.
Over-indebted: In 2005, in order to satisfy the expansion plan, raising capital for domestically and globally expansion was done through issuing shares to public. ABC borrowed an enormous amount of money from Australian big four banks: CBA, NAB, Westpac and ANZ). In the wake of the global financial crisis, it couldn’t refinance its huge debts, so the administrators were called in. In the end, ABC got too big for its own good, also made itself to the end.
Blinding oversea investment: After becoming the dominant player in the domestic market, ABC Learning has pursued an aggressive overseas expansion. The high levels of debt and