Selling Your Health Business: Top Tips

The aged care, NDIS and similar sectors are experiencing a wave of reforms and many business owners operating in those sectors are carefully considering their futures – including whether to sell their business.

Having a clear road map of how a sale might work and the right team around you is essential to help you get the best sale price with the lowest stress and risk exposure. Here are some top tips for a successful sale.

• Understand the sale process: Selling a business is a complex process. Before this process begins you typically need a valuation and a sense of market appetite for what you’re selling, so you can then seek expressions of interest. Once you’ve found a potential buyer, you’ll then enter into initial discussions to make sure you are aligned with all the key sale terms in principle (and subject to contract). You’ll then respond to their due diligence requests (where buyers request information and records from you), so the buyer can decide whether to proceed and if so, on what extra terms. You’ll then negotiate and sign a sale contract,  and follow the terms of that contract, which will require all parties to do certain things before, during and after sale to give effect to the transaction. Your lawyer can tell you exactly what’s required and act for you throughout the entire process to help you get the most favourable deal.

• Expect the unexpected and work with your team to address any issues: It’s not unusual for, say, a buyer to demand unexpected terms during the negotiation process or for a seller to experience delays getting approvals or other preconditions of a sale going ahead. When the unexpected happens, make sure you understand what the practical impacts are and what options are available to you. Often these issues can be managed without derailing the deal, as long as they are identified and actioned early. Your lawyer should problem-solve these with you and help you get the best outcome.

• Get the right advice from the right team: Smart sellers get the right team of professionals on board before making a deal. A seller’s team will usually include a broker, valuer, accountant and lawyer. It may also include financial advisors and consultants, depending on the deal. If you’re selling an aged care, NDIS or other highly-regulated health business, it’s particularly important that you engage industry specialists. The challenges faced by health businesses, such as regulatory and funding requirements, are unique and industry experts may be able to foresee and circumvent issues that a non-specialist could easily overlook.

• Satisfy the buyer’s due diligence requirements, while protecting your own interests: Due diligence is an important stage of the sale process and should be carefully managed by the seller’s team. While it’s important to satisfy a buyer’s due diligence requirements for the deal to move forward, this must be balanced with your best interests and what is reasonable and appropriate to ask for as a disclosure.  Your lawyer can assess and respond to any requests on your behalf. And if the buyer wants to renegotiate the deal after they complete their due diligence, your lawyer can help you negotiate the right terms.

• Get a robust but fair contract drawn up: As the seller, your lawyers will usually prepare the first draft sale contract. This should be on terms that are favourable to you, but without including terms that are too one-sided and might breach unfair contract terms laws. It’s likely that the buyer will want to negotiate some terms, and your lawyer should  make recommendations and negotiate on your behalf.  Crucially, your lawyer should also help you understand the practical and legal implications of any proposed negotiated changes so you can make an informed decision about whether the deal is still worth going ahead with on those other terms and can take appropriate steps to manage any extra risk.

• Don’t derail: Make sure that you understand what you’ve agreed to do and do it. You should also, as far as legally possible, hold the buyer  accountable for what they’ve agreed to do. It’s easy to say this but can sometimes be hard to achieve. It’s important to tell your lawyer as early as possible if there’s any chance you won’t be able to meet a contractual obligation. And if the buyer doesn’t hold up their end of the deal, your lawyer will help you take appropriate action in response.

Ready to Explore a Sale?

Our team includes experienced M&A specialists who regularly act in the sale of aged care, NDIS, allied health and similar businesses – big and small, for profit and not for profit. To find out more about how we can help you, contact us today at info@kinnylegal.com or 02 9199 4563.

 This blog post does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to you.  Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.

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