August Equity books 2.5x on home care exit

It is August Equity's first exit from its £155m second fund. The sale returned 37% of the fund.

August Equity has returned a big chunk of its second fund by selling Enara, a UK home care provider, to a strategic buyer called Mitie Group, it said in a statement.

The London-based firm sold the business, which was acquired in 2008, for £111 million. The sale returned 37 percent of the fund and generated a 2.5x return, August Equity’s managing partner Philip Rattle, told Private Equity International. The investment also returned 44 percent of invested capital, he added.  

The firm planned an auction this autumn, but received a number of direct approaches before the official process started. “Those discussions went very well, so we pursued that,” Rattle said. “There is a continued plan for the management to continue to grow the business, organically and through acquisitions. There is an unfinished business plan, which they can still execute on. But after 4.5 years and with a high level of interest in the business, it made sense to go with a strategic buyer,” he added. 

Enara has provided home care for the elderly since 1996. Under its ownership August Equity completed a buy-and-build strategy in what the firm describes as a highly fragmented market. The UK business completed more than 50 add-on acquisitions.

 After 4.5 years and with a high level of interest in the business it made sense to go with a strategic buyer.

Philip Rattle, managing partner at August Equity. 

Healthcare is a very attractive sector to invest in, Rattle said: “clearly because of the demographics. But secondly there’s more consumer preference on how elderly people should be cared for and there has been a level of outsourcing from local authorities”.

August Equity recently hired Stuart Quin as an investment director to further enhance its healthcare strategy. Quin used to be head of the healthcare team at 3i Group in the UK. “We have taken him on because we think there are more [attractive] businesses in the UK healthcare market, particularly around pharmacies and pharmaceutical services”, Rattle said. “Broadly healthcare is a very important part of our business in Fund II. We think there’s a lot more to do there.”

August Equity Fund II, which has nine investments, is now fully invested. The firm expects there will be more exits in 2013. “We are very pleased with the Fund II performance. There are a number of companies in there that are trading well ahead of expectation and ahead of plan,” Rattle said. Some of the companies have already been approached, he added.

The firm plans to do two more investments by the end of the year, but declined to comment on how it would be funding them. The firm declined to comment on fundraising.