The 10-year partnership between Care Principles and 3i created a flexible, innovative blend of services for people with learning disabilities, combining commercial success with clinical excellence.
A pioneering start-up
Care Principles was founded in 1997 by four senior managers from General Healthcare Group, the UK’s leading independent provider of healthcare services. The new venture’s primary goal was to offer medium-secure hospital facilities to support the care and rehabilitation of patients with learning difficulties who were detained under the Mental Health Act. The first hospital opened in Suffolk in December 1997 and was soon followed by four more purpose-built sites in Staffordshire, Kent, East Yorkshire and Norfolk. 3i invested €2.1m in the start-up company for a 38% shareholding and worked closely with the founders to help Care Principles grow into a business that was successful financially and renowned for the quality of its care. In the company’s early days, it was still quite rare for the private sector to participate in this area of mental healthcare provision – Care Principles’ high standards quickly marked it out as a leading pioneer in its field.
Fresh opportunities
After eight years, the founders of Care Principles had achieved their goals and were ready to move on. 3i, however, identified good reasons to continue – and step up – its participation, as partner Mike Turner recalls: “As the National Health Service (NHS) became increasingly comfortable with the role of private providers in mental healthcare, we saw a variety of opportunities opening up for Care Principles. The business had gained a strong reputation as a provider of medium-secure facilities for patients with learning disabilities. We believed that it could extend its expertise into complementary areas, including the care of people with personality disorders and Asperger’s syndrome. The purchase of Ermine Care gave us a range of healthcare options that we could use to help people ‘step up’ or ‘step down’. This innovative and seamless approach is good for service users because it avoids unnecessary disruption. At the same time, it simplifies management and administration for healthcare purchasers.”
Expertise in partnership
In addition to helping Care Principles build the care pathway, 3i used its sector expertise to support the further evolution of the business. In the view of Paul Preston: “3i’s sector knowledge and healthcare contacts were invaluable. They’d done a lot of research into the management of personality disorders, for example, and played a major role in helping us build our capabilities in that area. Their insights into the NHS were also vital. As pressure grows in the public sector to demonstrate value for money, we needed to show that we offered a fair price as well as clinical excellence. 3i encouraged us to be proactive in putting forward our case and used their contracts effectively to inform Care Principles’ strategy and positioning.”
The next phase of growth
By 2007, Care Principles had 15 hospitals and care homes across the UK, offering a highly flexible range of services and around 400 beds. In the course of 10 years, the business had evolved from a start-up operation to a highly respected care provider with annual turnover of €100m and 1,500 employees. As the business prepared to build a number of large new hospitals, the time was right for Care Principles to continue its growth under fresh ownership. In July 2007, 3i’s shareholding in the company was bought by The Delta Fund in a transaction which valued the business at €400m. For 3i, the investment had been a highly successful partnership, which not only established an excellent private sector care model but also yielded a money multiple of 3.5x and a strong IRR of 81%.
Opening the care pathway
3i acquired the founders’ shareholdings in 2005 and became the majority owner. To take the new, broader-based vision forward, it appointed a fresh leadership team with deep sector experience. Paul Preston, the former MD of General Healthcare Group’s BMI Healthcare, joined as CEO, while Nick Irens was appointed as Chairman (having previously chaired award-winning 3i investment, Westminster Health Care). Shortly after making the further investment, 3i helped Care Principles acquire Ermine Care, a provider of community-based specialist services. In addition to three hospitals and a care unit, Ermine also had expertise in helping patients live successfully in their own homes. For Paul Preston, this began to put in place key elements of the new strategy: “We wanted to create a ‘care pathway’, so that people with learning disabilities and challenging behaviour could move between different facilities and get the right care within the least restrictive environment for their needs.”
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