O’Donnell Solicitors has recently acted for a number of clients operating in the care sector and specifically care homes, both on sales and acquisitions of Care Homes based on both an Asset Purchase and Share Purchase model.
The sale of any business invariably presents a number of issues pertaining to both the business and property and can be complex and involve varying degrees of work depending on the type of transaction (shares or assets). Due to the nature of the care sector, sellers and buyers must meet specific compliance requirements before operating a care home business, in particular those requirements of the Care Quality Commission (CQC).
Sellers of care home businesses must comply with the CQC’s set of standards, which include, but are not restricted to, a certain standard of catering facilities and suitably trained staff, including a manager with NVQ Level 4 expertise. The property itself must meet certain requirements, including minimum floor space requirements and the availability of suitable facilities, including grab rails. In addition, a new owner must gain registration as a new provider and this often means a split exchange and completion. For Asset sales and purchases, this also enables consultations on any measures and compliance with TUPE generally.
Registration as a new provider can take up to six months, so those considering a purchase should begin the process as soon as possible. The CQC conducts a regular inspection and provides a ranking. During the sale process, the care home must continue to meet a certain standard up to the point of sale or else risk a low rating impacting the potential sale value.
In an acquisition context, a Material Adverse Change (MAC) clause is a contractual mechanism that seeks to allow the buyer to terminate the acquisition agreement and withdraw from the transaction if, before completion, certain events occur that have a significantly detrimental effect on the target’s business, assets or profits.
In the event of split exchange and completion, it is customary to agree (MAC) clauses to facilitate withdrawal by a Buyer where a MAC occurs between exchange and completion, meaning the Purchase is no longer attractive. These must be drafted carefully and not too widely from a Seller’s perspective to avoid unilateral withdrawal from the Purchase on spurious or unreasonable grounds or without reason.
For more information on the distinction between an asset and share sales, see our previous blog.
O’Donnell Solicitors has considerable deal experience in the care sector and is well-placed to advise both buyers and sellers in relation to a proposed sale or purchase.
For more information, please contact James O’Donnell or a member of the commercial/corporate team.