Reforms to spur aged-care deals

The law changes address recommendations of the royal commission into the aged-care industry.

The passing of the Albanese government’s aged-care bill in parliament this week is expected to kickstart a fresh round of merger and acquisition activity in the sector, with private equity firms said to be actively assessing opportunities.

The law changes address recommendations of the royal commission into the aged-care industry and introduce a tougher regulatory model and more funding, including worker pay rises, capped management fees and improved transparency around the finances and operations of providers.

Private equity firms are known to be actively assessing opportunities.

While it may seem Bain Capital only recently purchased the aged-care provider Estia, some think it may exit sooner rather than later.

Boston-based Bain purchased the listed Estia last year for $838m, and in hindsight, the verdict around the industry is that it bought at a cracking price.

Bain will determine whether it is the right time to sell based on money multiples and the internal rate of return, sources say. And the understanding is that it’s already met those targets.

It faces the choice of holding on longer, only for the market to change and demand to wane, or selling now while it can achieve a great price.

In other activity, Pacific Equity Partners is in exclusive talks to buy half of aged-care operator Opal, and has probably been checking out other businesses.

The view around the market is that the sector has bottomed, following industry reform and additional government funding.

Some suspect Bain will wait for the outcome of the Opal process before it moves on Estia.

Another business likely to be in the spotlight is the $2bn Regis Healthcare, which has been considered in the past by private equity firms including TPG Capital, but its share price has soared since September.

Another possibility is that Bain looks to consolidate by buying a rival like Regis. Other groups that have been rolling up aged-care operators include Bolton Clarke and Calvary.

Calvary purchased Estia’s rival Japara Health in 2021 in a $380m buyout.

DataRoom understands that before Calvary purchased the business, New York-based private equity powerhouse Blackstone held talks about potentially buying Japara.

Bolton Clarke is one of the country’s largest independent aged-care providers after buying industry player Allity for $700m in 2021, adding 43 nursing homes to its existing portfolio.

Singapore Post

Meanwhile, Pacific Equity Partners now has exclusive access to buy not only Opal but the $1bn Australian business of Singapore Post, seeing off competition from Blackstone and BGH Capital in the Bank of America-run process. Local companies in the portfolio include Freight Management Holdings and Couriers Please.