Robert Kilgour has expressed regret for turning to private equity when he was looking to grow Four Seasons Health Care in the late-1980s.
Interviewed for a French documentary, Ageing Europe: Cashing in on growing old, Kilgour discussed the emergence of the operator 36 years ago and its initial plans for growth.
‘I founded Four Seasons Health Care and opened my first care home when it was attractive for private companies to come into the sector,’ he told the programme. ‘That expanded slowly for the first several years, then we had the opportunity to buy a bigger company that had 61 care homes, and neither the bank [nor] our own pockets had the appetite to fund this deal that would be transformational. So that’s when we had to go knocking on the door of private equity…’
Alchemy Partners acquired the operator ‘quite cheaply’, according to financier John Moulton, improving its operations and growing it before offering for sale to private equity groups, which ‘competed vigorously’ for it.
Attracted by its profits, three funds succeeded one another in the takeover of Four Seasons before going into administration in April 2019 because of its growing debt.
‘I got private equity involved in Four Seasons,’ Kilgour told the documentary. ‘The others that were not so good, that came after Alchemy, wouldn’t have got involved if I hadn’t started the ball rolling. I have a burden on my back; of responsibility for that, which I have to accept and carry. Would I do it again today? No.’
He said ‘over-ambitious’ returns have led to the care home sector being squeezed and as a result ‘damaged’.
Plans
Kilgour’s comments in the documentary come as Renaissance Care, his current venture, celebrates 20 years in business with a plan to achieve £100m turnover by 2029.
Renaissance Care, which began with two care homes, 90 employees and a turnover of £2m, now employs 1,300 people caring for 800 residents across 17 settings throughout Scotland, with revenue of £46m. It has sale and leaseback partnerships with both Aedifica and Impact Healthcare REIT.
In his role as executive chair at Renaissance, Kilgour has a five-year plan to grow the number of care homes it operates across Scotland to over 30.
It is in the process of buying its 18th home, together with plans to open two specialist care units for patients with serious head injuries and Huntington’s Disease.
‘For two decades, we have built up an impressive track record of improving the quality standards of the homes we bring into our portfolio,’ Kilgour said. ‘The skills and experience of our amazing and hard-working staff have underpinned this successful strategy and we are hugely excited about this next, major expansion phase.
‘When we started out, the UK’s ten largest care home operators ran 27% of all care home beds but that figure has now reduced to around 18% as several large, UK-wide operators such as Southern Cross (854 care homes) have gone into administration and been broken up. I firmly believe that the positive future for elderly care in the UK lies in strong but smaller regional care home operators.’
He said Renaissance’s acquisition strategy is evidence smaller operators can develop into strong regional groups of between 30 to 60 care homes.
‘I firmly believe the sector is ready for a new type of regional consolidation and our expansion plans will therefore focus on acquiring homes to join the Renaissance Care family, providing more quality, individual care to hundreds more residents across Scotland,’ he said.
In 2022, the group introduced a flexible working model, which has resulted in improved staff retention rates, lower vacancy rate and limited use of agency workers. ‘Flexibility around the needs of our staff has allowed for an improved working environment that properly supports our staff and we remain incredibility passionate about accommodating the individual needs of our employees,’ he said.
Reserves
Speaking to CM, Kilgour said while there is good and bad private equity, as well as good and not so good leases, he feels he is too old to do another round with private equity investment.
‘I’m 67 years of age,’ he said. ‘Would even a good private equity firm want to do five or six years with me as executive chairman? Maybe I’m wrong, but I’m probably, at 67, too old even for a good private equity player.
Renaissance will focus on growing using its own reserves, bank funding and sale and leaseback agreements ‘I have a five year-plus plan to create a strong regional care home operator and I’m very enthusiastic and excited about it despite my advanced years,’ he added.