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Due diligence when selling a care home

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How to perform due diligence checks when selling a care home

When selling a business, due diligence checks are carried out as standard on the seller to ensure that the transaction can be facilitated smoothly and that no surprises arise along the way. The process will bring to light any legal or financial risks that could jeopardise the transaction and potentially pose a risk to the business.

As the care industry is highly regulated, compliance checks must be carried out to ensure that the premises are fit for purpose and that the buyer meets strict criteria to operate a care home and has demonstrable experience in the field.

The due diligence process when selling a care home is extensive as the sale can affect numerous stakeholders, including investors, employees, service users and their families. As such, care must be taken when preparing to sell a care home, finding a buyer, and closing the sale.

What is due diligence in a business sale?

Due diligence when selling a care home must be performed to verify the seller’s identity, investigate their financial history, and unearth any financial, legal or compliance risks that could hinder the sale. Such checks are required to ensure that the commercial interests of the business are protected, outstanding liabilities are discovered, and risk is managed.

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What due diligence checks are required when selling a care home?

When selling a care home, you must mitigate risk by conducting due diligence checks on the buyer, as they would on the seller. You can use information that is openly and freely available to the public to conduct due diligence, such as Companies House data, in addition to paid business intelligence and credit reporting platforms.

Due diligence when selling a care home is essential to secure the future prosperity of the business.  Here are some due diligence checks that are commonly used when selling a care home.

-          Identity – Request documents to prove buyer identity. This will raise any red flags, for example, if the buyer is bankrupt, subject to a County Court Judgment (CCJ) or winding up petition.

In addition to a formal identity verification check, business profiles and reputable media coverage are useful resources from which you can learn more about the seller’s character.

-          Financial background and commercial understanding – Are the financial dealings of the seller honest, strategic, and profitable? Can their commercial understanding of the care home sector help position the care home advantageously?

-          Industry understanding – Are they experienced in operating a care home and familiar with CQC (Care Quality Commission) guidance?

-           CQC standards - Once the transaction completes, the buyer will become the primary ‘care provider’ and shoulder the responsibility of operating the care home, a duty sometimes shared with a registered care home manager.

The standards set out by CQC for registered managers are as follows:  

  • Must be of good character
  • Must be able to properly perform tasks that are intrinsic to their role
  • Must have the necessary qualifications, competence, skills, and experience to manage the regulated activity
  • Must supply documents to confirm suitability

The due diligence process will differ based on the sector, for example, while the sale of a healthcare business is guided by CQC, the independent regulator of health and social care in England, businesses in other sectors also turn to their professional bodies for instruction.

How to sell a care home

To sell a care home, tap into a network of registered parties looking to buy a healthcare business. A business broker can help build a bridge to a pool of interested buyers and provide unique insights into how to price a care home, how much a care home is worth and how to successfully sell a care home.

One of the first steps will be to value your care home to calculate the market price and determine a suitable asking price. An experienced business broker can help negotiate a sale price and maximise sale value.  

For more information on how to sell a care home, get in touch with a business sale agent at Selling My Business.

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