Business
Southern Cross was a leading privately-owned participant in the UK residential care market. The company provided services in senior living and elderly rehabilitation.
Market
From our research in Healthcare, we identified the UK elderly care market as a consolidating sector underpinned by demographic trends. The sector was populated with smaller companies unable to access capital for growth.
Strategy
We built a rapport with the owners and management of the company, completing the deal in 2002.
Our strategy focussed on building a well capitalised broader based residential care group with significant sustainable growth opportunities through:
- Investing in company infrastructure for scaleability and depth of management
- Making substantial investment in IT and staff resourcing
- Improving training, customer service levels and medical and care standards
- Meeting customer needs further by entering complementary new markets, including mental health and higher acuity elderly care
- Accelerating growth through selective new site openings and add-on acquisitions whilst maintaining conservative levels of financial and lease debts
Outcomes
Between 2002 and 2004 we invested in the group’s infrastructure, including IT, Board and second tier management, best-in-class medical and care standards and staff training.
To meet customer needs further, Southern Cross entered the higher value PLD sector, caring for patients with acute psychiatric problems, brain injuries and learning disabilities, acquiring two companies in the space and subsequently growing to be the UK’s fourth largest PLD operator.
We increased the number of employees to 8,500, expanded the number of facilities from 141 to 160, developed a pipeline of an additional 1000 beds and initiated selective discussions with further add-on acquisition targets.
Throughout the period of our ownership it was our policy that Southern Cross maintain lower levels of financial and lease debts than other large care home groups. As such, a significant number of valuable freehold properties were retained on the balance sheet and contributed almost half of group profitability with high levels of rental cover maintained on leasehold sites.
Southern Cross was acquired by Blackstone in September 2004 with substantial freehold property backing and low levels of debt. It was subsequently listed on the London Stock Exchange in July 2006, valued at £425m.