If you are considering buying or selling a care home, then Rix & Kay’s specialist Care Sector Team has produced a concise guide that examines the most important elements that can help ensure any care home sale or purchase runs successfully.
For a full copy of Rix & Kay’s guide to buying or selling a care home business please email email@example.com
In this series of blogs by Dominic Travers, Corporate Partner in Rix & Kay’s Care Sector Team, we will be covering:
- The Cast – The parties that are typically involved during a care home purchase or sale and the importance of getting the right team in place
- The Process – For those who have not bought or sold a business before, the process can be surprisingly stressful and time consuming. So what is involved in a typical selling and buying process?
- The Sellers – If you are considering selling a care home business then how can you maximise the value of your business?
- The Buyers – How can buyers protect their investment and what questions should you be asking?
- A Distressed Purchase – Distressed care home businesses are sometimes bought out of Administration. But what are the differences to a usual sale and purchase?
Part 1 – The Cast
The private residential care home sector presents potentially lucrative business opportunities for those with sufficient capital to invest. The sector is (understandably) well regulated and it is important that would-be sellers and buyers have the right advisory team who understand the issues.
So who are the leading cast?
In a secondary market (i.e. not new build) care home transaction the following players will be usually be involved:
This may be one or more individuals, a company or other corporate entity. Sometimes individuals will own assets such as a property that will be transferred as part of the transaction before or on completion.
As with the Seller, the Buyer may be one or more individuals or, more often, a company or other corporate entity.
The Care Home Agent and Broker
An Agent will usually be instructed by a Seller to assist them in the sale process. The Agent will give the business an initial appraisal and have a list of potential buyers on its contact database. Good Agents will seek to get the best price for the Seller. Larger Agents also offer a broking service to assist Sellers with refinancing and Buyers in obtaining finance.
Unless the Buyer has sufficient financial resources it will need to borrow funds for the transaction from a bank or other lender. The Lender will have a loan to value ratio and other criteria against which it will lend.
The Seller’s Accountants will be involved pre-completion in the preparation for sale, including pre-sale reorganisations, and the Buyers’ Accountants will be involved in the due diligence process.
Solicitors The Seller and the Buyer will instruct separate Solicitors to act for them. The Solicitors will assemble a deal team comprising a corporate lawyer who will deal with the transaction documents together with property and employment specialists. The Solicitors may be involved in the initial documentation such as heads of terms and confidentiality undertakings. They will certainly be involved in the legal due diligence process either managing the provision of information on behalf of the Seller or reviewing it for the Buyer. The Solicitors will draft and negotiate the sale documentation and in conjunction with the Agent manage the various parties to enable the transaction to complete.
Last but not least, the Care Quality Commission (CQC) is the government agency responsible for governance of quality in care homes. As a result of the CQC’s registration requirements, the time needed to complete a sale of a care home may be significant, and once a buyer is found, it will be necessary for them to obtain a new CQC registration for that specific care home before completion can take place. It may be possible to expedite the process if the buyer is already registered with the CQC as they can make an ‘add-on’ application to an existing registration. Even this type of registration can take a few months to complete.
In the second part of this series, that will be published soon, we will be taking a look at a typical care home sale or purchase process and what is involved.