General Healthcare
Investing for growth
When it was acquired in 2000, General Healthcare Group (“GHG”) was the largest acute care hospital provider and leading independent provider of specialist psychiatric care services in the UK. It had enjoyed 17 years of continuous profit growth.
Recognising promising market trends
By 2000, historical growth in the acute healthcare market was in excess of GDP growth. Changes in the political attitude towards private healthcare had the potential to provide a new stream of business by allowing the private sector to become more involved in the treatment of NHS patients.
Attractive demographics, improvements in technology, and a low level of spending in the UK relative to other countries, further underlined potential growth prospects.
Securing the means for continued investment
BC Partners recognised the potential for significant continued growth if GHG had access to sufficient financial resources to allow it to take advantage of the opportunities available in the UK healthcare environment.
Funds advised by BC Partners acquired GHG from Cinven in September 2000 in a transaction financed with the first-ever whole business securitisation of a hospital operator. This financing structure gave the company flexibility to make considerable capital investments in developing the business.
Financing all areas of growth
Under six years of ownership, GHG enjoyed considerable organic growth and made two significant acquisitions. A group of two hospitals was acquired in Scotland in 2002 for £20m and the Mount Alvernia hospital in Guildford was acquired in 2005 for £24m, achieving unequalled national coverage.
Major capital projects were completed at existing facilities at the cost of several million pounds every year. In addition, capital projects at two new facilities were completed: the extension of the Clementine Churchill hospital in north London, and the construction for £21m of a new hospital in Coventry which opened in January of 2006.
GHG also invested heavily in bidding for a number of second wave tenders to provide Independent Treatment Centres to the NHS.
Re-focusing on core business
Apart from the main acute care hospitals business which provided 80% of group sales, GHG operated two further divisions. The health screening and occupational health operation BMI Healthcare services (5% of group sales) was sold in 2005.That year, the very profitable Partnerships in Care psychiatric operations (15% of sales) was also sold, allowing management to focus on the core business of acute care hospitals.
Value creation
EBITDA growth, both organic and through new builds, was the major contributor to the value created from the investment as a result of heavy investment in all areas. Debt reduction was not a major factor in value creation as available cash was used for reinvestment in the business to capitalise on growth opportunities.
Repositioning GHG to focus on its core market of acute care hospitals made it more attractive to a trade buyer who paid a strategic premium to acquire the number one operator in the UK.
In May 2006, GHG was sold to a consortium led by Netcare, a leading South African hospitals group, supported by a consortium of financial investors.