Spotlight on Liz Woollett, Chandler & Co
Spotlight on Liz Woollett, Chandler & Co.
An Interview on the Current Care Home Market
Key Takeaways
- Demand fundamentals remail strong in many parts of the UK.
- Lenders continue to support well-structured care home transactions.
- Sustainable earnings remain central to valuation.
- Operational quality matters as much as property quality.
- Experienced sector advisers can help identify opportunities and risks early.
Q: Liz, how would you describe the current state of the care home market?
Over the past couple of years, parts of the care home market have faced increasing pressure. Rising staffing costs, higher energy prices and growing regulatory requirements have affected operating margins for some providers, particularly those with a significant reliance on local authority-funded placements.
In some cases, fee increases have not fully kept pace with cost inflation, creating challenges for operators seeking to maintain profitability while continuing to invest in their services.
That said, the picture is far from uniform. Demand for care services remains strong in many areas of the UK, supported by long-term demographic trends. Well-run homes in attractive locations continue to attract interest from buyers, lenders and investors.
The market has become increasingly selective. High-quality businesses with strong operational performance, good compliance records and sustainable earnings often remain in demand, while homes facing operational or financial challenges may require a more detailed assessment.
It's sometimes tempting to simplify the market into categories such as purpose-built versus converted stock, or private-pay versus local authority funded homes. In reality, every opportunity has its own strengths and challenges, and successful acquisitions are usually built on a thorough understanding of both the business and the local market.
Q: When you're assessing a care home opportunity, what are the key factors you focus on?
I always take a holistic view, but there are several areas that consistently form part of my assessment:
Position, competition and demographics Understanding local demand drivers, demographic trends and the competitive landscape is fundamental. A strong location with favourable long-term demand characteristics can provide a solid foundation for future performance.
Occupancy and demand Sustained occupancy levels are usually a positive indicator, particularly where there is evidence of ongoing demand, referral relationships or waiting lists.
Funding mix The proportion of privately funded residents, alongside any third-party top-up arrangements, can have a significant influence on profitability and resilience.
Accommodation quality Practical considerations matter. Features such as lifts, a high proportion of single bedrooms, en suite facilities and the potential to enhance the environment over time can all contribute to a home's long-term attractiveness and operational viability.
Compliance and management strength Regulatory performance is an important consideration, but so too are the experience, stability and capability of the management team responsible for delivering care on a day-to-day basis.
Staffing profile and costs Staff retention, recruitment practices and reliance on agency staff can provide valuable insight into the overall health and sustainability of an operation.
Fee growth potential I look at whether there may be scope for future fee increases that remain appropriate within the local market and reflect the quality of the service being provided.
Financial sustainability Ultimately, any business needs sustainable earnings. Financial adjustments and add-backs should be realistic, evidenced and capable of standing up to lender and purchaser scrutiny.
Q: What tends to drive care home valuations today?
While every transaction is different, valuations are often influenced by a combination of sustainable earnings, occupancy stability, funding mix, property quality and future growth potential.
The quality and sustainability of EBITDA remains a key consideration for both buyers and lenders. However, valuation is rarely based on financial performance alone.
Factors such as management structure, regulatory compliance, local demand and the condition of the property can all influence how a business is perceived.
In our experience, buyers and lenders are increasingly focused on understanding the long-term sustainability of performance rather than relying solely on historic figures.
Q: Are there opportunities in underperforming homes?
Absolutely. Some of the most interesting opportunities can be found in homes that require operational improvement, provided the underlying fundamentals are sound. For example, there may be opportunities to improve occupancy, strengthen management, enhance the resident offering or invest in the physical environment.
However, these projects can carry additional risk and often require significant expertise to execute successfully. Many lenders will look closely at the operator's track record and their ability to deliver the proposed improvements before providing support.
For experienced operators with a proven ability to improve performance, these opportunities can sometimes be particularly attractive.
In the current market, some operators are also reviewing their portfolios and focusing on core assets, which can create opportunities for buyers with the experience, infrastructure and management capability to unlock value through operational improvements.
Q: How are lenders viewing the care sector at the moment?
We continue to see strong appetite across a broad range of lenders for well-structured care home transactions, including both specialist healthcare funders and mainstream banking institutions active within the sector.
As with any sector, lenders are focused on the sustainability of earnings, management experience, regulatory performance, occupancy levels and affordability. Different lenders will have different criteria, and not every opportunity will be suitable for every funding source.
We are also seeing lenders become increasingly sophisticated in their assessment of care businesses. Strong governance, quality management information, succession planning and demonstrable operational resilience can all influence how a transaction is viewed.
For buyers and operators, this reinforces the importance of presenting a clear and realistic business case supported by robust financial information and a well-considered growth strategy where appropriate.
"One of the most valuable things we can often provide is an independent perspective before significant costs are incurred."
Liz Woollett, Chandler & Co
Q: How can Chandler & Co support buyers and operators in this market?
I regularly work with both existing operators and prospective buyers to assess acquisition opportunities, understand likely lender appetite and identify potential issues before significant time and money are committed to a transaction.
An early review can often help buyers focus their efforts on opportunities that are more likely to meet both their operational objectives and funding requirements.
We also advise operators and investors on acquisition finance, refinancing and growth funding solutions across the care sector, drawing on our experience of working with specialist lenders active in the market.
Through our involvement in the sector, we're also able to connect clients with a range of experienced professionals including accountants, solicitors, care consultants, valuers and surveyors where appropriate.
We also publish regular market commentary and sector resources for buyers and operators looking to stay informed about developments within the care sector.
Q: In summary, what's your outlook for the sector?
The care home market continues to evolve, and operators face a range of opportunities and challenges.
While cost pressures remain a reality for many providers, demand for care services continues across much of the sector. Well-managed businesses with strong operational foundations, appropriate funding structures and a clear understanding of their local market are often better positioned to navigate changing conditions.
As always, careful analysis, realistic underwriting and a long-term perspective remain essential. Buyers and operators who take the time to understand both the opportunities and the risks are often best placed to make informed decisions.
