By Emma Ladd, senior associate in the Corporate & Commercial team at Gardner Leader (www.gardner-leader.co.uk). offering a wide range of legal services for businesses and individuals.
Fundamentally, a care home is like any other business – money comes in, money goes out, employees, contracts, customers etc etc. However, when it comes to putting a care home business on the market, the sector in which you are operating puts some additional pressure on the sale. This can make dealing with the transaction more challenging and can increase costs. So what areas tend to cause problems when dealing with buying or selling a care home?
Any business which is CQC regulated needs to consider what impact this will have on the transaction. In particular, any recent report which has not been absolutely glowing (or where everything which has been flagged as needing improvement has been rectified) can have a serious impact on the sale price.
You should also consider the timing of the transaction in relation to any likely upcoming visits from CQC.
Even if your last report was good, there is no guarantee that they won’t find something for you to rectify in this one, which can cause the price to reduce or even stop or delay the transaction as a whole while the matter is sorted.
If any members of staff are departing as a result of the transaction, this will need to be considered in terms of notifying CQC if any registered individuals have changed. Also if any of the departing staff have been heavily involved in the regulation side of the business, these tasks will need to be redistributed.
Care homes have historically used a large amount of overseas staffing. With changes arising to the immigration system following the UK’s exit from the European Union, this has become more complicated and homes are feeling the additional administrative burden. Additionally, any staff who come from EU member states now have to be checked to ensure that their immigration status is up to date and that they have the correct documentation.
Any purchaser of the business is going to be checking on this carefully, as any failure to comply comes with substantial sanctions and a loss of critical staff.
We are also seeing an increase in care homes struggling with staff retention. Covid-19 has placed care staff under considerable pressure, which has led to more and more leaving the sector. Care homes are finding themselves struggling to maintain a reasonable wage bill, with the use of agency staff causing large increases in staffing costs. This has had an impact on the prices that purchasers are willing to pay for the business, as they are becoming less economically viable.
Every person we speak to is heartily sick of data protection. They still remember the compliance pain they went through a couple of years ago and are getting to grips with what this means in the ever changing work environment that we have seen over the last 18 months.
In a transaction context, data protection is absolutely key. A balance must be struck between giving the purchaser all the information and yet protecting the personal data of those involved, including staff and residents. The due diligence exercise is long and complicated and sellers often do not want to spend additional time anonymising or aggregating data to ensure compliance with data protection legislation.
However, this is becoming more and more necessary. While we have not yet seen any cases where release of information as part of a due diligence or disclosure exercise has been investigated and sanctioned by the Information Commissioner, most commentators think that this is just a matter of time. Additionally, the increased use of electronic solutions, such as data rooms, means that there is an inherent insecurity in the process. Parties therefore need to put this additional step into their process (and factor in the additional time and cost that this will involve) to prevent any nasty surprises in the future.
Care home transactions work on the same process as every other business sale, but their sector position means that the transaction is often a little more complicated and costly. Factoring these issues into your planning will make any transaction run a little more smoothly, leaving both parties free to consider the commercial benefits of the transaction, rather than the pain.