In 1945 the Bank of England and other major banks set up Industrial and Commercial Finance Corporation to provide long term investment for smalll and medium sized businesses. In the 1950's it was allowed to raise external capital and in 1973 it merged with a sister company which provided finance for larger companies. Then in 1983 it changed its name to Investors in Industry and it is now commonly known as 3i. In 1987 the banks sold their stake in 3i and in 1994 it was floated on the stock exchange with capital of £1.5 billion. Since then it has diversified a lot. It is now a private equity company and it has one of those websites which US residents can't enter. It says
QUOTE
3i is an international investor focussed on Private Equity, Infrastructure and Debt Management, investing in Europe, Asia and the Americas
The new CEO was formerly a managing director of Baring brothers: so that is reassuring. He has been appointed at a time when 3i group's share price has slumped. But despite a "buccaneering"background in mergers and acquisitions he does not intend to break the group up, he says.
I mention this because it so happens that 3i owned a number of children's homes in the north west of england, through a company called Continuum Care and Education group. Continuum was formed in 2006 through a merger of 4 existing providers called respectively Farrow House, Green Corns, Herts Care and Cambrian care. Continuum's last accounts show a turnover of £25.8 million and profit of £230,000. Turnover in 2006 was of the order of £10 million, so they are doing ok as to growth. Yet "company check", which provides information about companies for suspicious minds notes that they had assets of £3,911,000 in 2011: and liabilities of £7,233,000: which does not look healthy.
One of the children's units Continuum care ran was a "single occupancy home" called Green Corn. A single occupancy home is pretty unusual: it means that it only has one resident and it is reserved for the most troubled young people. It is meant to provide "intense individual care" and in this case the company billed the local authority £250,000 per year for the service. This has become important because the single occupant was one of the young people exploited by a group of men in Rochdale for sex: and they have recently been convicted. The girl involved regularly went missing, despite this astronomically expensive "intense care"
3i sold Continuum care to Advanced Childcare Ltd in April of this year. They are a private company which is the "leading [private] UK provider of residential and fostering care services" and its website reassures potential investors that its services are 100% funded by the UK government. Apparently it was started with a single home in 1996, and has grown into a major private provider. Advanced Childcare is owned by GI partners, another private equity firm, which bought it for £28 million in March 2011. Their website has a headline: it says
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Finding hidden Asset value
In an obscure world
And it describes its function as "With approximately $6 billion of capital under management, GI Partners seeks to achieve superior returns by unlocking value obscured by complexity and market dislocations." whatever that might mean. In another part of the site they elaborate
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Investments are structured to have substantial downside protection underpinned by intrinsic asset value, which may be in the form of fixed assets, long-term customer contracts or mission-critical business attributes. Consistent with the strategy deployed in the firm’s first two funds, typical deals will include i) platforms for “buy and build” strategies, ii) companies that are either out of favor or in some form of financial distress, and iii) assets around which an independent business can be created or expanded. Companies or divisions that are subject to regulatory or structural change, cyclical challenges or financial complexity are also excellent candidates for the firm’s investment and management expertise. Post-acquisition, GI Partners seeks to recognize the upside potential of its investments by executing identifiable value creation initiatives including add-on acquisitions, geographic expansions, management augmentation, capital structure optimization and new business development.
That could mean anything: but I suspect it means that they are buying children's homes for the same reasons other private equity firms bought care homes for the elderly: either to get a piece of the bottomless pit of money from the taxpayer: or to asset strip them. Assets is what the are interested in, after all. The sale price has not been disclosed as yet.
On the face of it the pattern of sale and resale we saw in care homes for the elderly is being repeated in children 's homes.
Edited by FionaK - 19/5/2012, 01:45
