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Tuesday, July 29, 2008

The curse of private equity and the UK care home industry

Cheap money, a guaranteed demand, ever rising property prices and lots of cheap overseas labour to do the work –what more could any business want?

It is not surprising that shed loads of private equity poured into the care market since it seemed a one-way bet. The result is that some care suppliers have been more intent on financial engineering than their core business of providing care.

The marvellous old saying: “trends go on until they stop” has resulted in some of the UK’s largest care suppliers teetering on the brink of financial disaster.

The article in the Sunday Telegraph details the plight of Four Seasons Healthcare and other highly geared UK care companies. The moral of the story is that once management’s attention is more intent on balance sheet manipulation than running the fundamentals of the business the result can be disastrous. The dreadful thing about this saga is that the poor souls involved in the fall-out from the mess are some of the weakest and most fragile members of society. Dick Stroud

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