Within recent years Private Equity has been attracted to Care homes. As we all know from watching the news, Blackstone made a £600million profit from Southern Cross by floating the company on the stock market. However, Southern Cross then fell into administration as landlords increased their property rents to the point whereby the business was no longer viable without significant company restructuring.
Yet only a short while afterwards we read that Four Seasons has been sold to Terra Firma, another private equity fund. This deal according to news reports was being financed by £525million of new high yield bonds.
So with this being the case, how do the Private Equity companies make their profits? Well I guess like any company would.
Either by cutting their current costs, or make those who are already paying the bills such as the elderly residents, local authorities or the families of those in care pay more. If it’s the local authorities who are told to pay more, then it will be a challenge to persuade local government to pay even more at times of recession and Government cutbacks to their Social Care budget.
And all this accompanied by the morale of already lowly paid staff is unlikely to be improved by another display of Private Equity ownership of another of our Care Home providers.
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