The Last Piece of Private Equity: The Troubled Kids Industry

NEW YORK, Feb 17 (Reuters) – Private equity firms are increasingly investing in behavioral services for troubled youth, according to a new report released on Thursday by the non-profit Private Equity Stakeholder Project.

The services that private equity firms buy include those for children with intellectual and developmental disabilities, as well as those enrolled in foster care, juvenile justice, autism and troubled teens programs, according to The report.

Youth behavioral health services are usually provided by non-profit organizations. But increasingly, that is changing, according to the report, “Children Are Not Well: How Private Equity Benefits Behavioral Health Services for Vulnerable and At-Risk Youth.”

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The report cites what it calls the “troublesome” track record of private equity in youth services, saying reliance on unlicensed staff, inadequate training and lack of maintenance of facilities have led to “abuse, neglect and dangerous living conditions for the young people cared for by these people”. companies.”

The report claims that the private equity business model exacerbates the problems as companies often aim to double or triple their investment in as little as four years.

As an example, it says that within two years of taking over foster care and disability service provider The Mentor Network, Centerbridge Capital and the Vistria Group took nearly half a billion dollars in dividends financed by the debt of the company.

Elsewhere, Alaris Royalty, which owned foster home and troubled teen company Sequel Youth & Family Services, is said to have made a profit of $71 million, an annual return of 23%, on his investment in the company.

Reuters was not immediately able to find out these dividend and earnings figures.

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Reporting by Michelle Conlin; Editing by Kenneth Maxwell

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