PE firms maintain care sector focus

Two new deals highlight the sustained level of interest shown by private equity firms in the growing care homes sector.

Electra Partners, the European mid-market buyout firm, has become the latest firm to invest in the UK care homes sector, leading a management buy-in at Ashbourne Care Homes Group, the UK’s fourth largest elderly care home operator.

 

Electra Partners has made an initial investment of £15m in the business, as well as assuming debt of £14m. The fund is also providing an additional facility of £35m for the further development of the business, which currently operates 129 care homes with 6,200 residents.

 

Ashbourne had been the subject of a prior MBO led by Electra Partners Europe in 1993. It was then taken public in 1994 and subsequently sold first to Sun Healthcare and later to a private UK company. For the year ended March 2003, Ashbourne had a turnover of approximately £123m.

 

The buy-in team is led by Jim Flaherty, who has previously worked with Idun Health Care and Principal Healthcare Finance, a care home finance business originally backed by Electra Partners Europe. Also joining the board of Ashbourne is Graham Smith, former managing director of BUPA Care services.

 

Private equity firms have been heavy backers of the UK healthcare sector during the past year, reflecting an increase in investment in healthcare both in the public and private sectors. Additionally, it is likely to be a major growth sector given the changing demographic of the UK population. Last year, 3i and Doughty Hanson, HgCapital, Barclays Private Equity and Sovereign Capital were among the most active players in the market. Since the turn of the year, Sovereign Capital has completed three small care-related deals.

 

Also announced this week was the buyout of Care Management Group, a UK-based provider of specialist residential care services, acquired by Isis Equity Partners for £30m. ISIS, alongside Barclays Leveraged Finance, has committed capital to the growth of CMG, which is expected to include the acquisition of existing operators.

 

Liz Jones, who led the transaction with David Sherratt on behalf of ISIS Equity Partners, said the sector was ‘ripe for consolidation’. “CMG is extremely well placed to grow, given its well established infrastructure, solid customer relationships and absolute commitment to delivering high quality levels of care.”