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While this is one of the larger deals to complete in the health and domiciliary care sectors this year, there has also been plenty of deal-making activity at the smaller, sub-£10 million level.

For example, Claimar Care, a domiciliary care services provider, has been one of the more active deal makers in the sector, acquiring 12 businesses since it joined AIM some 18 months ago.

Claimar¹s largest deal in this time was its £10.2 million acquisition of Acorn Home Care in July. But Claimar¹s deals are typically smaller than this, such as its £300,000 deal for Boundary Care in September.

Another serial acquirer is Careforce Group, a provider of home-based care for the elderly and people with physical and/or learning disabilities. The company has made three acquisitions since it was bought by social housing repairs and maintenance provider Mears Group in March for £22.2 million.

Careforce has since acquired Claremont Golcar, which trades as Britannia Care, for up to £1.1 million as well as North Yorkshire-based Simply Care and Bristol-based Capable Care for undisclosed sums.

Private equity plays

Elsewhere, as an example of the growing maturity of the sector, private equity firms are now making secondary transactions. For example, Apax Partners recently sold its stake in Healthcare at Home, which provides complex home healthcare services to patients, to fellow private equity firm Hutton Collins.

While financials were not disclosed, the deal value was significant; Hutton Collins¹ investment was supported by £175 million of debt underwritten jointly by Nomura International and Landsbanki.

Healthcare at Home¹s directors, who remain in place, also released some of their equity in the deal, but retain a majority shareholding.

The deal is also indicative of the relatively long-term nature of healthcare plays. According to Apax¹s senior managing partner, Adrian Beecroft, the firm first invested in Healthcare at Home 12 years ago when the company had four employees. Today it has more than 600, providing a range of services to clients.

Nevertheless, some private equity firms have struggled within the sector to find an investment with sufficient mass. The sector remains very fragmented ­ according to Mark Hales, chief executive of Claimar, there are some 3,500 care operators in the UK ­ with many single branch operations. Businesses such as this often do not have the scale or management in place required by private equity players.

But private equity players are nonetheless attracted by the potential rewards on offer within the sector. With the NHS outsourcing increasing amounts of its health and domiciliary services, and with an aging population, there are significant opportunities for businesses to capitalise on.

In addition, local authorities that have traditionally outsourced services to up to 30-40 providers, have in the past 18 months sought to rationalise that number and are increasingly offering contracts to larger players that can meet their needs.

Indeed, many will look to emulate the success of companies such as Southern Cross Healthcare. Under the ownership of US-based private equity firm Blackstone, Southern Cross embarked on an ambitious acquisition programme that turned the company into the UK¹s largest operator before floating last June. The company¹s share price has since doubled and in its interims for the six months to April 1, 2007, its ebitda rose by 42% to £21.8 million.

Darlington-based Southern Cross is now a FTSE 250-listed company with a market cap in excess of £1 billion. It has also continued its acquisition strategy since its flotation, including buying rival Avery for £96.5 million in June.

With companies such as Southern Cross continuing to look for deals, and with the sheer numbers involved in the sector, consolidation is set to rise in the coming years as the larger players buy up smaller rivals, which may struggle in the face of increasing costs of regulation and the change in policy by local authorities.

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