The recent agreement for two major US private equity companies, Kohlberg Kravis Roberts (KKR) and Stonepeak, to acquire the UK property company Assura for £1.61bn ($2.09bn), has once again highlighted the involvement of private equity in the NHS. Assura specialises in healthcare property with more than 600 health care buildings, including many GP surgeries and primary care centres.
Assura is currently a public company and the deal will be put to shareholders for agreement, but the Assura board has recommended acceptance of the deal. Regulatory approval is also needed. The board had previously turned down a £1.5bn bid for the company from Primary Health Properties (PHP).
The acquisition will remove Assura from the stock exchange and take the company private.
The public sector market, such as health, care or education, is attractive to private equity (PE), as their income from the NHS or local authorities is seen as virtually guaranteed.
Reuters notes that the bid by KKR/Stonepeak reflects “persistent interest from the private equity backers in capitalising on resilient demand for healthcare infrastructure across the UK.”
Private equity and other investors will not have missed the promise in the Autumn budget in October 2024 of a £100m capital funding which is ‘earmarked’ for 200 GP estates upgrades. This money will be available from April 2025 and is part of the Government’s increase of £3.1bn for capital funding between 2023/24 and 2025/26, bringing the total to £13.6bn.
In the UK, public services are increasingly being targeted by PE investors. The social care sector, for vulnerable adults and children, is now almost exclusively privately owned with heavy involvement of PE companies.
The UK healthcare sector has seen a number of takeovers in recent years covering a whole range of services, including ambulance services, diagnostics, community care, complex care and dentistry. Companies owned by PE include those with large contracts with the NHS, such as The Priory Group and Active Care Group in mental health, Everlight Radiology in diagnostics, and EMED in ambulance services.
One of the most high profile PE-owned UK healthcare companies is HCRG Care, which has large contracts in community healthcare and over 50 GP surgeries. The company is owned by the PE company Twenty20 Capital. Most recently in October 2024, the company was awarded the contract to run adult and community services in Bath, and North East Somerset, Swindon and Wiltshire ICS worth £1.3bn and the contract for children’s services in Surrey and parts of North East Hampshire, worth £295m over 96 months.
There are well known concerns over the involvement of private companies within the NHS, but the involvement of private equity increases these concerns due to the way this type of investment operates. In short, private equity has a reputation for aiming to make a profit for its investors, including pension funds and very rich individuals, in as short a time as possible and the ways it achieves that are often not positive for staff, customers or the community in which the business is based.
For this quick profit to be accomplished, private equity companies have a reputation for being ruthless with cost-cutting, including using a reduction in head-count; transfer of production overseas to a low-cost economy; renegotiation of supplier contracts; a merger with a company they already own; use of lower-skilled workers on lower wages; selling of company subsidiaries; and selling of valuable assets, such as property, which often they lease back.
Another issue is the heavy reliance on debt to finance acquisitions – saddling the companies with vast amounts of debt, which means that bankruptcy is more likely.
In the care home sector, the downfall of Southern Cross in 2011 and Four Seasons in 2019 were fuelled by debts from their private equity investors.
More recently the involvement of private equity in children’s social care, which includes fostering, children’s homes and other services such as residential school places, has been the subject of damming investigations by the Competition and Markets Authority, the Local Government Authorities (LGA) and The Observer.
More details of private equity and the serious harm that these companies have inflicted on public services in the UK can be found on the NHS For Sale website.
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