Cabot Square books 2x on UK care homes business

It is understood the firm is planning a fifth fundraising this year

Cabot Square Capital has completed the sale of Signature Senior Lifestyle to its current management team, according to a statement from the firm.

Cabot Square sold the business for £75 million (€102.5 million; $116 million), having taken out around £10 million (€13.7 million; $15.5 million) prior to exit.

Signature, a care home investor, developer and operator with nine open communities and a further seven under development, was established by Cabot Square in 2006. According to Signature executive chairman Tom Newell the business now has more than 1,000 employees.

Funds for the management buyout were provided by management as well as financing from several institutions, with New York-listed Health Care REIT acting as senior lender. HCN has invested more than £1 billion (€1.37 billion; $1.55 billion) in healthcare properties in the UK, including in prior transactions with Signature, and the lenders will also provide capital for future developments, Cabot Square said.

Cabot Square invested in the business using its CS Capital Partners II, a 2003-vintage €234 million vehicle, according to PEI’s Research and Analytics division. The vehicle has two remaining investments.

In June 2013 Cabot Square sold its majority stake in Key Retirement Solutions, another CS Capital Partners II investment, to Phoenix Equity Partners for £35 million (€48 million; $54 million), generating a return on invested capital of 5x. This was the third divestment from the fund, and the first three divestments combined resulted in a 2.9x return and an internal rate of return of 35.7 percent, PEI reported at the time.

In the last quarter of 2014 the firm sold asset management business MedicX Group, from the same fund, netting a return of 18x.

Cabot Square invests in small and mid-sized companies in the UK and Western Europe, focusing on businesses in the financial services, operating property and infrastructure sectors. It currently manages around £700 million (€958 million; $1.08 billion) across three funds, CS Capital Partners II, III and IV, the firm said.

Cabot Square closed its fourth fund in 2011, having collected a total of £175 million (€239 million; $271 million), including co-investment capital. The capital for this fund was fully deployed by July 2014, according to PEI’s Research & Analytics division. It is understood that the firm expects to raise its fifth fund this year.

Cabot Square declined to comment on fundraising.