Mike Parsons: You’re in good hands

To help fund free social care for the elderly, Labour said in February that it was considering the introduction of a ten per cent tax on people’s estates after their death. Parsons calls the proposals “headline-grabbing, quick-fix politics” but is cautious not to plunge too deeply into the specifics.

“Maybe they’ll introduce a levy on inheritance, but who knows – probably not even Gordon Brown. The Tories are taking a potshot at the possibility. It’s a good poster, but it does little for reasoned debate… but then again, that’s what Labour has refused to have since 1997.”

Exponential growth

Looking forward, planning is the big “keep you up at night” issue for Parsons. Permissions to build new homes are so “incredibly slow” that Barchester had to look at acquisitions instead. Between 1995 and 2003, Barchester completed no less than 32 acquisitions, from individual nursing homes to small groups of homes. 

“We went to the market looking to buy quality homes,” Parsons explains. “We’ve never bought anything that was less than ‘quite good’, and we always made sure we budgeted enough money to upgrade it to our standard.”

Barchester has always owned its own homes – which are valued at over £1bn in total – though this is starting to change. Ownership gave Barchester the freedom to make them fit for purpose, but Parsons says he’s opening up to leasing. 

“When capital became very constrained in 2007, it suddenly looked quite attractive to get a contractor to build the home on his balance sheet and then lease it to you – but even then, we’ll never go above leasing ten per cent of our portfolio,” he explains.

How did Barchester fund this ten-year buying spree? Parsons says that his investors have always bought into his growth plans.

That’s not surprising, given the calibre of his investor base – the Irish horseracing clique of Dermot Desmond (whose investments have included Celtic FC and London City Airport); Denis Brosnan (of Horse Racing Ireland and Kerry Group fame); John Magnier (Ireland’s top thoroughbred stud owner and former high-profile stakeholder in Manchester United); and JP McManus (who, on top of his private forex business, is also one of Ireland’s biggest racehorse-owners), all of whom were investors in David Lloyd Leisure.

After Parsons’ friend and former tennis star David Lloyd floated his eponymous leisure chain in 1993, the investors snapped up three care homes out of administration, and approached Parsons to merge their businesses together under the Barchester Healthcare name.

The company had to wait until 2004 to see an explosion of growth, however, when Barchester bought its biggest competitor, Westminster Healthcare, from private equity firm 3i for £525m.

“At a stroke, it gave us 88 more care homes and brought us to over 10,000 beds. Everybody said we’d gone mad and paid far too much for it, but the next few years proved we hadn’t,” says Parsons.

“These were really good-quality homes, built in quality locations,” he says. “They needed a bit of an upgrade, but the locations were very good and gave us a strong presence in the south-east.”

Transatlantic challenge

Today, Parsons is looking to the US as the next big growth area. “After Westminster, it was quite clear there wasn’t another company of sufficient quality for us to buy in the UK,” he said. “When the opportunity to buy in the States presented itself, with Trilogy Health Services [one of the top 20 American care home operators], we jumped on it.”

Parsons has now given Trilogy an ambitious five-year programme to treble the size of the business.

“It’s been highly successful so far. Trilogy is only present in six states. That means we have another 44 states that we can move into – huge growth prospects!” Parsons says with a smile.

Elderly healthcare may be a sometimes controversial market, but it’s not one that shows any  signs of slowing.


Interview: Jason Hesse

Photography: David Short

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