The private equity firm’s agreement to take a 50% stake in Australia’s largest private residential aged care operator is confirmation that the sector is again headed for boom time as demand increasingly exceeds supply.
As we report this week, Pacific Equity Partners (PEP) – which already holds a 47.5% stake in land lease operator Serenitas – has now reached agreement on acquiring AMP Capital’s 50% share of Opal HealthCare.
This is a significant purchase for a number of reasons.
While the price remains undisclosed, sources suggest that the Fin Review’s reporting of a circa $1 billion price tag is correct which would value Opal and its 10,000-plus aged care beds at over $2 billion.
PEP is one of Australia’s oldest and most successful private equity firms.
Their interest is mature businesses – and their aim is primarily to triple the value of the business within five to seven years before exiting with their returns. As you can see below, PEP does not invest in unprofitable businesses.
That would suggest PEP is seeking to increase Opal’s value to around $6 billion by 2030 – a huge uplift.
It is also worth noting that PEP’s Managing Director, Paul Foster, was previously Head of Infrastructure, Australia & New Zealand at AMP Capital and sat on Opal HealthCare’s board at that time.
So PEP understands the business and must feel confident Opal can deliver this kind of return on investment.
Just 1,250 net new beds added in 2024
It’s yet another sign that investors are banking on big dollars in the future of aged care beds.
Private equity firm Bain Capital has already reportedly met its targets for its $838 million acquisition of Estia Health just 12 months on from its December 2023 purchase on the back of increased demand.
Advisory firm Ansell Strategic, which helped PEP with their due diligence, says it has not seen so much activity in the mergers and acquisitions space since the Living Longer, Living Better reforms were passed in 2013 as operators chase scale through acquisitions.
“Pacific Equity have a lot of confidence in the sector, and I think it goes back to those fundamentals of an ageing population, greater levels of freedom within the user pay framework, and a known doubling of demand in the future,” Managing Director Cam Ansell told The Weekly SOURCE.
“They have a lot of confidence in Opal’s management team to be able to acquire, expand, build and manage that growth.”
Despite the aged care regulator homing in on care minutes and additional services – both issues touched on in Ansell’s latest Board Pack – the reality is almost no new beds are coming into the system.
Australia’s aged care sector added a net of just 1,250 beds between January and November 2024 according to new information provided to Budget Estimates.
The Federal Government may be gearing up to support more older Australians at home, but there will still be a need for high-acuity care – and families will want new, modern facilities for Mum and Dad.
Operators like Opal HealthCare will be sitting on ‘rolled gold’ – and PEP wants in.
Mergers and acquisitions are just one of the topics that will be on the agenda at the upcoming 2025 LEADERS SUMMIT, 18-19 March in Sydney.
Don’t miss out on your opportunity to plan for your organisation’s next stage of growth – register here.
