Graphite Capital has overcome the freeze in the buyout market by backing an existing management team in the elderly healthcare homes space.
The UK private equity firm is investing £23 million of equity from its most recent fund and has raised £30m of debt from a banking syndicate to back the management of existing portfolio company Optimum Care in a new venture.
Market talk in recent months has speculated that buyout firms could look to deploy capital by making bolt-ons to their existing portfolio companies. In a market bereft of willing vendors where raising debt for new deals is difficult, enlarging existing portfolio companies makes sense.
Moreover, in an uncertain environment, backing a management team which has produced results for you in the past brings additional comfort, so long as the firm is not worried about over-exposure to one sector.
Named Willowbrook Healthcare, the new venture will use the £53m of development capital to build and develop new care homes on prime sites. It will also look to acquire some premises.
Willowbrook will be run by a management team led by John Strowbridge. He currently heads up Graphite’s other investment in the healthcare sector, Optimum Care.
This is the third time Graphite have backed him and his team. In 2005, Graphite bought a stake in Avery Healthcare, an elderly care homes operator, before selling the business to strategic buyer Southern Cross in 2007 generating a return of 2.7x the firm’s original investment.
It created Optimum by holding back some assets from the sale to Southern Cross. Optimum and Willowbrook will both trade under the Avery name, which Graphite retained following the sale to Southern Cross.
Royal Bank of Scotland led a banking syndicate alongside Allied Irish Bank and Bank of Ireland which provided the £30m of debt.
Source: Thomson Merger News