News & Views

3rd April 2018

Montreux Healthcare Fund Q1 2018 Update

It has long been the strategy of The Montreux Healthcare Fund to seek consolidation opportunities in the specialist care market within the UK, using our expertise to consolidate this highly fragmented, highly regulated market. Our goal is, and has always been, to maximise value to our investors.

The Fund bought The Regard Group in 2014 and since acquisition, we grew the business to one of the foremost specialist care providers in the UK. Driving EBITDA upward from c.£12m to above £23m and occupancy from 682 to 1055 in just three years, we built a high quality business which attracted much interest from buyers across the investment world. It was originally our goal to exit the business in 2020 but a burgeoning market where a very good valuation could be realised meant that the view on an early exit was seen to be best for investors.

Hence, in December 2017, Montreux Capital Management (UK), hereafter MCM, advised The Montreux Healthcare Fund on the sale of The Regard Group. After extensive consultation with N M Rothschild & Sons Ltd on the valuations of businesses in the market, it was decided to place The Regard Group into a competitive process for sale.

THE DECISION TO SELL THE REGARD GROUP

After extensive anecdotal evidence in H2 2017, The Fund commissioned N M Rothschild & Sons Ltd to undertake an assessment of the market to establish the enterprise value of The Regard Group. Due to rising demand from non-trade buyers (infrastructure funds, pension fund etc.), The Fund’s board was advised on multiples in the market shifting upwards for large, high quality assets such as The Regard Group. The consensus was that should a predetermined price-point be achievable, there was a unique opportunity for an early exit, if a suitable replacement asset could be sourced.

The below table illustrates the market from 2012-2017:

 

A MARKET RICH WITH OPPORTUNITY

It became clear that it was the right time to sell The Regard Group, however, MCM’s market analysis showed there was still significant scope to consolidate the specialist care market yet further. The sale of The Regard Group would thus be dependent on sourcing a high-quality acquisition target with which to spearhead another consolidation strategy in the market. Several potential assets were sourced. Active Assistance was earmarked from the beginning as the strongest for the Fund’s next consolidation platform. It’s owners having finished their investment cycle, we had the opportunity to purchase a quality, growing asset.

 

ACTIVE ASSISTANCE: A LEADING CARE PROVIDER

Active Assistance is the Largest Single Focus Complex Care Provider in the UK, and one of only three multi-regional providers national. It is a quality asset, with high growth potential. When assessing Active Assistance, some key advantages were apparent from an early stage:

  • An existing national network.
  • The business was already successful within domiciliary care.
  • Market fundamentals in Acquired Brain Injury and Spinal Cord Injury, Active’s Assistance’s market, are strong with a growth rate of 2% p.a. and 3% CAGR respectively.
  • The domiciliary care model is favoured by NHS as a more suitable and cheaper alternative within this sub sector.
  • Strong care quality standards driven by an experienced management team.
  • Service users in a domiciliary environment usually require lifelong care, and service users rarely change providers.

Active Assistance has a strong, growth orientated management team:

  • The CEO has over 20 years’ senior management experience within the healthcare sector and proven experience in driving growth forward.
  • The 6 strong senior management team possess deep experience in both clinical, and business functions.
  • Successfully managed a workforce of c.1900 through a fully executed phase one growth strategy.

In addition to these advantages, the debt financing aspect of the Active Assistance acquisition is likely to be much more advantageous than our previous relationship.

 

CONCLUSIONS

The above gives some insight into the Fund Board’s decision to sell The Regard Group. In simple terms, the decision charts the progress of the Fund’s strategy away from a maturing asset, and towards a growing asset. The strength of the new asset and the reputation of its management team put the Fund, and its investors, on a strong footing going forward. The Fund will continue its acquisition strategy, driving efficiencies, and pushing up the EBITDA multiple as it grows its operating company with the aim to broadening the scope of the company and the self user base it cares for.

 

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