3 minute read

Top tips for buying and selling in the social care sectors

Next Article

Top tips for buying and selling in the social care sector

An acquisition or disposal of a business in the social care sector is a complex process that requires careful planning, timing, legal expertise, and a clear understanding of regulatory obligations. Whether acquiring a purpose-built care home or selling a specialist facility, success depends on navigating each stage of the transaction with precision.

The process of acquiring or disposing of a business can be broken down in three phases: pre-legal, legal and post-legal, and each phase presents its own challenges and opportunities.

Pre-legal considerations

Before engaging legal professionals, it is essential to assess all available options. Sellers should consider whether to sell the business as a going concern or explore alternative uses for the property. Buyers may wish to evaluate development opportunities and secure appropriate funding. Early engagement with a surveyor can help determine market value and identify improvements that could enhance the property’s appeal.

The structure of the transaction is also critical. A share purchase involves acquiring the entire company which includes all its assets and liabilities, while an asset purchase allows the buyer to pick and choose what assets they want. The nature of the property—whether freehold or leasehold—may influence the legal process and the structure of the transaction may also be driven by tax implications.

Heads of terms, or a letter of intent, should be drafted to outline the commercial agreement. This document lays out principal terms and key information such as for example the parties involved, the purchase price, due diligence procedure, any earn-out or deferred consideration, exclusivity, and confidentiality. Including property-specific details and third-party consents at this stage can prevent delays later.

Legal process

Once heads of terms are agreed, a due diligence exercise is conducted to assess the legal standing of the business and property and identifies any potential risks by assessing financial records, employee arrangements, insurance coverage, contracts, and regulatory compliance. This is followed by the drafting and negotiation of legal documents, including a sale and purchase agreement, property transfer agreement and other ancillary documents required to affect the transaction.

If third party finance is required, lenders may require legal charges over the property or the assets (if

they are held within a company). The transaction becomes legally binding at the point of exchange, with completion occurring once all pre-completion conditions are met which could include ensuring CQC registration has been obtained. This stage often involves multiple legal teams, including those representing the buyer, seller, lender, and landlord (if applicable).

Post-completion matters

After completion, several tasks remain. These include registering property transfers, paying Stamp Duty Land Tax (SDLT), and fulfilling any contractual obligations. Deferred consideration and earn-out provisions may be used to bridge valuation gaps or incentivise performance.

Restrictive covenants, consultancy arrangements, and future involvement in the business should also be considered and clearly documented.

Key takeaways

• Assess options early: Consider selling as a going concern or exploring alternative uses.

• Structure of the transaction: Take financial and legal advice as to whether a share or asset purchase is appropriate.

• Draft clear heads of terms: Include all key commercial terms.

• Conduct thorough due diligence: Review financials, contracts, compliance, and property.

• Understand legal timelines: Transactions can typically take 6 to12 months so key to plan ahead.

• Plan for post-completion: Address registrations, tax, and ongoing obligations.

• Use experienced advisers: Legal, financial, and regulatory expertise is essential.

This article is from: