The headlines often remind us that UK Social Care faces significant pressures with the lack of funding exerting financial burdens on care providers. As the Government continues to reduce national debt, Local Authority spending on adult social care has remained relatively flat in the last seven years (c.£20bn). The social and financial impact on families is momentous as the demand for care and funding ever increases. For care providers, the profitability impact is considerable. The CMA estimates that the average fees for self-funders were c.41% higher (£846 vs £621 per week) than Local Authority supported clients. While Government contracts can prove a key value proposition in M&A, such price disparity can significantly impact profitability and consequently ROIs for investors. Ultimately the exposure to Government contracts and large debts led to the administration of Four Seasons. Proving revenue and profitability drivers in any type of transaction is key to securing the best deal for our clients when looking for an exit or refinancing in this tough sector. As ever upfront preparation always pays dividends and good deals can be secured.
Four Seasons’ problems underscore the deep challenges facing the UK government in providing care for the elderly. All four of Britain’s biggest care home businesses — HC-One, Four Seasons, Barchester and Care UK — are up for sale and struggling to find buyers as a result of a Brexit-related downturn in commercial property sales and a long-term decline in fees paid by local authorities for elderly care. Most of Four Seasons’ residents are local authority funded, making a sale more difficult.