Private equity model 'wrong for care homes'
By Punchline reporter | 9th July 2021
Care homes in Gloucestershire are at risk from private equity buyouts which put the 'wrong kind of pressure' on them.
Speaking to Punchline Talks! this morning, Martin Hughes, chief executive of Lilian Faithfull Homes said there had already been 'catastrophic failures'
He said: "I'm not in favour of the private equity model in the care sector.
"That model has never worked in care. Whenever somebody from private equity has looked at the care sector, you're not there to make money and there are some catastrophic failures in the care sector when private equity gets involved because you can't run care homes for profit and expect it to work."
The issue of private equity buyouts has again been in the news with the pending sale of supermarket chain Morrisons to American private equity firms.
In the care home sector, the collapse of Southern Cross Healthcare, the largest operator in the sector with 31,000 residents in 2011, highlighted the dangers of private equity investment.
The Guardian reports that there have been 124 deals involving private equity takeovers of UK companies with a combined value of £41 billion so far this year. Asda, the AA and insurer LV have all been bought by private equity firms since the start of the Covid pandemic.
Martin added: "There are a number of care homes in Gloucestershire that have been snapped up by private equity. They buy the building and lease it back to the operator and it really puts the wrong type of pressure on the care home and the care home management to drive the profitability to pay the rent as opposed to driving profitability to deliver better care."
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