UK Care Homes: Pros and Cons of Private Equity Ownership

Private equity sponsors have a target rate of return required for their limited partners. Do we get to the more political question of, should this industry really be targeting a higher return when it’s so crucial to welfare?

It goes back to what the future adult care model should look like and what all parties should play as part of that, in terms of social responsibility. Clearly, any private investor that’s investing in any business does so for a reason: because they want to make a return from that. We all do—when we put money into a bank account, into our savings account- we want a return from that. Why would somebody not expect a return when they are risking a substantial amount of money in purchasing a business?

I think that there is a space within social care for investors, and in particular private equity, because it drives innovation. It does drive efficiency. I’ve seen examples where it has driven investment in technology that has supported the sector as a whole, and I don’t think that would’ve happened if the whole sector was funded by the public sector. An example at the minute would be the use of robotics in the dispensing of medicines. There are lots of examples around where businesses are just testing other ways of actually making the process of dispensing medicines more efficient and safer as well. I’m not sure that level of innovation would have come through in a completely shared environment.

There is a role for the private sector. Naturally, when operating within such a sensitive sector such as care, failures within the private sector do attract headlines. It’s just a question of the government really setting the right environment, working with a regulator that is there to ensure that an appropriate level of care is given throughout the market. I think that so long as the rules are set, then there is definitely a big role to play for the private sector going forward.