European mid-market firm Duke Street Capital, Paris-based asset manager Tikehau and Switzerland-based asset manager Partners Group have agreed to buy Voyage Care, a residential care provider from HgCapital.
The consortium agreed to buy the business for £375 million, according to a statement. HgCapital declined to disclose return information.
Duke Street declined to comment on how the ownership will be shared. “Partners Group put in slightly more of the capital, but in terms of governance sharing it’s a normal consortium deal,” Charlie Troup, a partner at Duke Street, told Private Equity International.
UK-based Voyage Care is a provider of specialist residential services and supported living for people with learning disabilities, associated physical disabilities, autistic spectrum disorders, brain injuries or other complex needs. The majority of people supported by Voyage Care typically require high levels of support throughout their lives.
Under HgCapital ownership, Voyage has grown to a business with approximately 8,500 employees, supporting over 2,000 people across 290 care homes as well as supporting approximately 1,000 individuals in supported living and their own homes. The firm made the original investment from HgCapital Fund 5, a £958.3 million, 2006-vintage.
The business was sold via auction, according to Troup. “Duke Street put the consortium together. We have known Partners Group for a long time. They were co-investors in Oasis, our dental business that we sold to Bridgepoint so we knew we could work together well, so it was a natural choice,” Troup said.
The capital invested has come from Duke Street and Tikehau, which last year acquired a 35 percent stake in Duke Street, with Tikehau taking a “significant underwriting position” in the deal, Troup said. “Now we have signed the transaction, we will syndicate the transaction to some of our investor base,” he added.
Investing on a deal by deal basis – a model taken up by Duke Street after it failed to raise a fund following the economic downturn – can be challenging, especially in auction processes. Deal-by-deal investors often need more time to arrange the funding than traditional fund investors with existing capital pools, and this can compromise their competitive advantage.
However Duke Street was in a good position partly because it had previously owned Voyage Group. “Clearly when there’s a competitive process with an advisor, you need to give them the confidence that you can deliver. In this case our sector credentials helped very much; the fact that we owned the business previously meant they were taking less due diligence risk with us than there might be with others. The fact that we successfully raised money on a deal-by-deal basis before also helped as well,” Troup said.
In the coming years, Duke Street aims to expand the business further. “Voyage Care is a market leader in this sector but it still has a lot of development opportunities and there’s acquisition opportunity since this is a very fragmented sector. It has 5 percent of the market share, so there’s a lot more to grow from here,” he added.