Care home owners to net huge profits from high profile sales…

It has been reported recently that two of the largest care home providers in the UK, Barchester Healthcare and HC-One, are on the market.

The care home giants have reportedly been listed for sale for £2.8billion and £1billion respectively, as the owners seek to profit from increased enthusiasm amongst private equity firms for investing in the social-care sector.

If either of these deals comes to fruition it will be the largest acquisition in the sector since Terra-Firma acquired Four Seasons Healthcare for £825million in 2012. Four Seasons itself is now being taken over by its main creditor, H/2 Capital Partners, with Terra Firma having made a loss of at least £450million.

However, the meagre performance of the Terra Firma deal has not put other investors off, it would seem. Cuts to state funding for elderly healthcare has led to the closure of many state-subsidised care homes. Couple this with rising demand for quality property from an ageing population and the combination has conspired to generate a buoyant market. Many care homes now boast a high percentage of self-paying residents, which makes them extremely attractive to private equity investors.

The growth of large-scale care home providers is undoubtedly good for scalability. Given the size of many of the private equity providers now dominating the sector, the challenge for investors in the future will be to allay criticism from the government, regulatory bodies and the general public, regarding the transparency and competitiveness of their offering.