Selling a Care Home: Full Guide

Selling a care home is a complex process and to undertake it successfully requires a deep understanding of both the care sector and real estate market together with specialist knowledge of company sales and their tax consequences.

The process of selling a care home involves various legal, financial and operational considerations that must be carefully managed to ensure a successful transaction. At Hawsons, our corporate finance experts have years of experience in advising on care and nursing home transactions.

In this guide, we will walk you through the key steps we support clients with when they are looking to sell a care home, from initial assessments and valuations to legal considerations and finalising the deal.

How to sell a care home – selling process

Key early-stage valuation

Once you have decided that you are seriously considering a sale of your care/nursing home, we’d recommend that you have your business (as opposed to just the property) valued through a financial assessment before you commence the sales process. We believe gaining an independent valuation is imperative at an early stage to ensure that expectations are realistic and achievable before investing significant time and energy in embarking on a sale.

Independently valuing a care/nursing home is a service that Hawsons Corporate Finance can provide. When we value a care home, we always consider all the relevant factors to ensure that we arrive at a fair and independent valuation. Here are some key factors we consider when valuing a care/nursing home:

• Property condition
• Business operations & performance
• Assets
• Track record
• Quality rating & compliance

Valuable advice on preparing the business and owners personal tax affairs for disposal

Even more important than the valuation exercise is helping to ensure that the business is suitably structured and prepared for a potential sale.  This is absolutely key to ensuring that the sale process itself is as smooth and efficient as possible as well as helping to ensure that the sales proceeds are maximised.

It is natural for prospective buyers to have a multitude of questions when contemplating a purchase and it is essential to be able to respond to all reasonable enquiries as fully as possible and on a timely basis, good preparation is the secret to this. This helps to maintain buyer confidence which in turn protects a seller’s value.

We would always recommend using a specialist tax adviser to review your tax planning on your behalf, our tax experts at Hawsons can advise on your personal tax consequences for the deal. Through our extensive experience and expert advice we will look to ensure the sellers maximise the consideration in the most tax efficient way including extraction of surplus assets and settling any director’s loan accounts.

Preparation is the key and it’s never too soon to start!

Assistance in preparing the Information Memorandum

Following the preparatory work, the typical next step we go through with our clients looking to sell a care sector business is preparing the Information Memorandum (or IM for short).

It is crucial to seek specialist advice during this stage to ensure the document accurately reflects the company’s history, activities, assets and its past, current and expected financial performance.  This document really helps to drive interest and excite prospective buyers as to the opportunity your business presents.

We can lead on the preparation of the Information Memorandum as we discuss all aspects of the memorandum with you and then also prepare a short, confidential, investment overview from the information contained in the IM, sometimes referred to as The Flyer.

Research and identification of potential purchasers

Whilst preparing the Information Memorandum, research is conducted into identifying potential buyers. To identify a potential buyer it is necessary to conduct thorough market research to understand the current demand and potential buyers in the industry and to whom your business will most likely appeal.

There are a multitude of avenues to explore when researching potential purchasers.  The strength of industry trends, such as the growth of senior living and healthcare services is driving general investor appetite.  Combining this knowledge with our networks of buyers, industry professionals and agents specialising in healthcare properties can provide valuable insights and connections to potential acquirers.  Additionally, it can be beneficial to explore online business marketplaces and professional forums where healthcare investors are active.  It’s also helpful to assess the financial health and acquisition patterns of larger care home groups and private equity firms that may be looking to expand their portfolios.

Researching and identifying a potential buyer can be a time-consuming and difficult process without professional assistance, our experts at Hawsons can take the strain on this. We can independently research active buyers and known investors in the market through access to our wider networks and buyer lists.  We will prepare a list of buyers and discuss these with you before approaching any potential targets.

Manage the distribution of information to prospective buyers

Once the tasks to this point have been completed, it’s time to market your business to the potential acquirers identified in the research process, emphasising the importance of the specific opportunities that your care home brings.

There’s a natural conflict between marketing the business for sale and maintaining the confidentiality of the process to protect its commercial interests.  This can be highly challenging to manage and is a key area where the support of an experienced professional will be invaluable.

Following initial contact, we then send a copy of the investment overview together with a confidentiality letter, the information memorandum is only then released after we have received a signed confidentiality agreement from interested parties.

Our in-depth service means we’re on hand throughout to attend all meetings and calls with prospective buyers and to address any initial queries they raise.

As we drive the process forward, we will review and negotiate all aspects of the terms of offers received to ensure maximum value is received, remember, it’s not just about the headline price!

At this point, we will enter into extensive dialogue with a shortlist of interested parties, further enhancing and driving the value with the aim of selecting a preferred party to proceed with. We will arrange and chair meetings between potential investors and yourselves as appropriate and continue to manage the flow of information and overall process.

The agreement of Heads of Terms marks a significant milestone in the sale process with this document setting out the key terms that a buyer is willing to offer and a seller, to accept.

Heads of Terms, sometimes known as a Letter of Intent, Term Sheet or a Memorandum of Understanding is a non-legally binding document and following its agreement it is normal to grant the preferred bidder a period of exclusivity during which time due diligence procedures can be carried out.

Assistance in negotiations with the acquirers

Once Heads of Terms are agreed, the buyers will perform due diligence and the share purchase agreement will be prepared by the buyer’s solicitors. It is crucial to seek independent financial advice during these negotiations to ensure informed decisions are made. We will liaise with the buyers’ accountants and advisors to address any due diligence queries and requests they may have. We will also host the online data room to share information requested as part of the buyers due diligence.

Post Heads of Terms - The acquirers due diligence phase

Once Heads of Terms are agreed, the buyer will perform due diligence and the share purchase agreement will typically be prepared by the buyer’s solicitors. It is crucial to seek independent financial advice during these negotiations to ensure informed decisions are made and to protect your value in the deal that has been carefully negotiated. We will liaise with the buyers’ accountants and advisers to address any due diligence queries and requests they may have. We can also host the online data room to control the information requested as part of the buyers due diligence.

Advice on the legal documentation

As the buyers due diligence advances, you will need to enlist the assistance of a lawyer to review/prepare the legal documents necessary to complete the deal.

The Share or Asset Purchase Agreement is the key document in a transaction but there are often a significant volume of other documents required alongside this to achieve completion.  It is essential for your lawyers and accountants/advisers to work in harmony at this time to achieve an effective outcome and mitigate potential risks.  We can recommend highly qualified and experienced lawyers to assist you through this process.

We’re always on hand to review the financial aspects of the Share Purchase Agreement and will be available to assist should any issues arise during the due diligence carried out by the acquirer’s accountants. Once all of these legal documents have been reviewed and any issues have been resolved the buying and selling solicitors can arrange transfer of funds to complete the transaction.

General project management

The process of selling a care/nursing home is often complex. Our project management expertise means that we are here to oversee the entire deal from start to finish to reduce your stress and workload whilst providing a seamless and professional service.

Post transaction aftercare

Not only can we project manage the entire deal on your behalf, but after your care home is sold we can provide post transaction aftercare services. Often the final price isn’t fully determined until the weeks that follow a sale and further support is required throughout this period.  Beyond that, if you are looking to re-invest in another company our Corporate Finance team can support this.

Alternatively, if you are looking to retire, our tax and financial planning team can assist with looking after your on-going tax affairs and wealth management.