Acorn Care Education Group was bought by the National Fostering Agency Group in August last year creating a single organisation worth an estimated £400m.
Children & Young People Now magazine has reported that following an initial investigation, the CMA has announced it will proceed with a more detailed “phase 2” merger investigation because of concerns that councils in some areas may now struggle to achieve value for money.
The market for independent fostering placement services is worth in excess of £750m a year and the companies are two of the largest national providers to local authorities.
Groups of local authorities often tender for services through framework agreements, which establish a list of independent providers with foster carers available in the local area, to ensure availability when their own in-house network of carers are unable to meet demand.
The initial CMA investigation reviewed all local authority framework areas in which the companies overlap in the UK, and found concerns in three framework agreement areas: Wales, Norfolk and the framework agreement area covering Luton, central Bedfordshire and Bedford.
“In each of these framework areas, the merged company’s position is strong and we found that local authorities may face challenges in ensuring value for money in framework tenders,” a statement released by the CMA said.
Sheldon Mills, senior director of mergers at the CMA, said: “Many local authorities have raised concerns with us that this merger could significantly weaken their ability to ensure quality of care in their local areas, at the best possible price, when placing vulnerable children.
“We closely investigated these concerns and found that in some areas local authorities may find it more difficult to obtain value for money as a result of the merger.
“We think the concerns warrant an in-depth investigation unless the company can offer undertakings which address our concerns.”
Income from foster care was shown in the NFA’s 2014 accounts as £94m, with the owners receiving £14.4m. Acorn Care, which was previously owned by a pension fund for Canadian teachers had revenues of £73m in 2014.
In his independent review of children’s residential care, government adviser Sir Martin Narey recently highlighted that eight commercial fostering agencies made £41m in profits in 2014/15.
TACT CEO Andy Elvin said ” I want to see the ban in Scotland on firms making profits from fostering extended to England. Excessive profits are being made by some agencies at a time when there is less money in the system. That clearly can’t be a good thing for vulnerable children.”