For Sale: Children’s Care Under Hammer
Two private equity firms are believed to be looking to dispose of controversial investments in children’s care homes.
The possibility of ownership changes will worry charities already upset about the presence of buyout firms in the sector following the collapse of Sedgemoor, which was put into administration earlier this month.
It is understood that Baird Capital Partners is soliciting offers for Castlecare, one of the largest privately owned firms in the sector with more than 40 homes in England and Wales.
Baird backed a £22.4m management buyout at Castlecare three years ago. Since the deal it has made a series of investments in the business including the acquisition of Sovereign Care, which works with children with behavioural problems.
Senior industry sources say that Advanced Childcare, which also works with children with behavioural difficulties, is being touted by its owner – thought to be Bowmark Capital.
Experts predict a wave of consolidation over the next five years as there are too many homes for the number of children requiring help. This is against the backdrop of a shift away from residential care, with the preferred option being to house youngsters with families.
Local authorities are also scrutinising the fees charged by operators, which could dent profits. Residential care costs between £2,000 and £4,000 a week depending on the child’s needs.
This week Sedgemoor’s owner, ECI, insisted it had been a responsible investor but that the group’s business model had been severely undermined by policy shifts that had a dramatic effect on the occupancy of its homes. It injected £2m as management tried to effect what was ultimately an unsuccessful rescue.
ECI said a refinancing in 2004, contributing to a £20m payout to investors, had no bearing on subsequent problems. ‘During our seven years of ownership, Sedgemoor was a well-run quality operation but during that period the world changed,’ said ECI partner Ken Lindsay.
Baird declined to comment. Bowmark did not respond.
