Ridgmont
Transaction Background
In May 2001 Graphite Capital led the £17 million secondary buy-out of Ridgmont Care Homes from Cinven. Ridgmont became one of the largest operators of care homes for the elderly in the UK. Ridgmont’s managing director had founded the business in 1995 and was seeking a new private equity partner to continue the group’s growth. Graphite made a total investment of £7.5 million to fund the original secondary MBO and further acquisitions.
Deal Attractions
Ridgmont was a well run operation which represented a good platform for further growth. We believed that the sector was at a cyclical low, as a result of over-capacity and government pressure on fee rates. However, the economic fundamentals of an ageing population and a rapidly declining supply of beds suggested a promising medium term outlook. The sector also remained highly fragmented with significant opportunities to grow through acquisition.
Achievements
- within a year Ridgmont acquired a group of 10 under-performing homes and turned them round into profit
- Ridgmont grew from 18 homes with 740 beds in 2001 to 29 homes with 1,314 beds
- the management team was broadened with the recruitment of a finance director and an operations director
- by 2005 proforma EBITDA before head office costs was in excess of £10 million
Exit
- we re-leveraged the business in August 2004, securing a return of more than twice our original investment whilst retaining our shareholding
- the management team also realised significant cash
- Ridgmont was sold to Ashbourne Healthcare in March 2005 for £88 million
- including the earlier refinancing, we made a total return of 6.4 times our investment at an IRR of 76 per cent
