Barclays PE backs care homes buyout

In the latest private equity play in the residential care home market, Barclays Private Equity has led a E55m MBO at Caretech.

European private equity firm Barclays Private Equity has completed a £35m (E55m) buyout at UK residential care homes company Caretech. The firm operates 52 mainly residential care centres, providing support services for people with learning difficulties.

Barclays Private Equity has purchased a 40 per cent stake in the company replacing some of the existing shareholders including 3i.

Andrew Murtagh, who led the deal for Barclays Private Equity, said the residential care homes sector, which has seen considerable growth over the past decade, was one in which the firm was increasingly seeking opportunities. “We are backing a proven incumbent team with a strong track record and have put in place significant additional funding to support their growth ambitions.

Farouq Sheikh, chief executive of Caretech, said he believed that there was likely to be a greater trend toward smaller care providers as the government moved away from the more traditional, large institutional hospital centres. CareTech's turnover currently stands at £13.4m and is expected to grow significantly as consolidation in the sector continues.

The MBO of Caretech represents the latest foray by private equity firms into the healthcare, and more particularly the residential care, sector – particularly in the UK. Last month, Hg Capital completed the E80m acquisition 3i’s interest in Castlebeck Care Holdings, a residential care provider for adults with learning and behavioural difficulties. In June, Phoenix Equity Partners acquired northern UK private hospitals provider Abbey Hospitals Group in a E40m deal.

However, it is not only the sub-E100m part of this sector that has witnessed an increase in activity. Three major deals have taken place in the E100m-plus sector, with a combined valuation in excess of E1bn. Nikko Principal Investments acquired 20 UK private hospitals owned by the Swedish listed healthcare group, Capio AB, for E400m in June, a month which also saw the completion of the 3i-backed management buyout of Westminster Healthcare for E425m.

The year’s third major healthcare transaction was Doughty Hanson’s acquisition of Priory Healthcare, operator of psychiatric healthcare clinics, for E455m back in May.

Barclays Private Equity’s most recent activity in the healthcare sector was the realisation in March of its E31m investment in The Doctors Healthcare Company, the UK provider of medical diagnostic services. The firm was sold to Sonic Healthcare Limited for E105m as part of the quoted Australian company's global expansion.