Tips for Vendors when selling a Care Home - Author - Julie Hopkins
When considering succession and exit planning from your care business this tends to be a plan some years before the actual deed takes place. There is something to be said for having all ‘your ducks in a row’ when you decide to sell your business to a third party or pass it on to the next generation, usually a family member. Your Selling Agent, Accountant and Solicitor all have a vital role to play in the selling process.
There are many factors to consider when selling your care business, with key factors to consider listed as follows:
Prepare a pre-sale pack to include a brief history and background of the business, including the date that the home was acquired
Include the current ownership structure (an area which sometimes causes confusion) and any changes in the business structure over the last six years, assuming that the business has been owned by the current owner for this period
Ensure that accounting records are up to date, including the filing at Companies House of the latest statutory accounts, together with up-to-date management information. This task often made easier due to the automation of bookkeeping records. An area to discuss with the accountant if needing to be brought up to date, since this is another area that can cause a sale delay
Consider specialist advice concerning capital allowances that will be affected by the sale
Provide copies of the latest statutory accounts for the last three years. The business Agent will consider the EBITDA of the business as part of the selling details
Record an overview of occupancy for the last three years and a look forward for the next twelve months to show the recovery trend post pandemic
Identify any exceptional or one-off income or costs covering the latest two financial year ends and current year to date, e.g., owner drawings, capital expenditure. Highlight separately any government covid related grants and identify Covid related expenditure where possible.
Consider if outline plans to improve/extend the property could improve the value of the business
If a home is two storey and currently does not have a lift, consider where a lift could be positioned, or consider obtaining planning permission for one. Smaller unsecured loans can be useful if funds are needed to assist. A point for discussion with a selling Agent and Valuer
Provide commentary on the level of involvement of the current owners in the day to day running of the business, highlighting the current management team and experience.
Provide commentary on the business continuity plan. Buyers may often find it easier to acquire a business where an employed manager registered by the regulator remains in place, consider if this can be done early.
Provide a summary of current agreed fee rates along with an analysis of the care/nursing costs associated with these services
Confirm contracts all current whether for private clients or local authority
Provide an overview of any current enquiries and their conversion rate
Provide a current rota overview with levels of agency used
Provide latest insurance policy in force
Provide latest Care Regulator report together with latest internal and external audits with action plans
Keep up to date information regarding leases and equipment rental contracts and utilities
Keep an up-to-date fixed asset register for each class of asset
It is recommended to have a pre exit consultation with the business accountant to consider if a pre-sale business restructure should take place
This includes discussions around a share sale versus an asset sale if the business is a company, including the tax considerations and who owns the shares
Tax due diligence can be extensive, and it is recommended to discuss this area with the business accountant
Another significant area to consider as part of the share versus asset sale is to remember that the regulator registration stays with a share sale but does not follow an asset sale
Consider the tax implications where a care home property is held outside of a company, an additional area to discuss with the business accountant
Also review any balances owed to the company via the director loan account, another area for the accountant
A retirement sale will also need to consider any capital gains tax implications and tax reliefs available, another area for the accountant
Mark Hickman, Director at Chandler & Co, Care Sector Mortgage Brokers commented: ‘At Chandler & Co we work on a ‘results only’ basis, therefore a vendor will know we will only be involved in a transaction if we are confident the buyer of their care home is able to obtain funding. As part of the Chandler & Co independent broker service, we would carry out checks to ensure that any potential applicant has the means to purchase. It is also important for buyers to know what mortgage options are available to them, and at Chandler & Co we offer independent, specialist and market knowledge during the entire buying process.
A piece of advice to vendors when the brokers are arranging the mortgage on behalf of a potential buyer is that they readily have available the following:
Full 3 years trading accounts
Latest management accounts
Current fee list – with the split on local authority and private fee payers
Any CQC action plans which may be in place
Brief detail of the management team including how long they have been in situ
This is not an exhaustive list (yes there is more to think about!) so always take time to consider a business succession and exit plan and consult with your selling Agent, Accountant and Solicitor
