Are you thinking of acquiring a care home in your next business move? rhw has seen a spike in enquiries in respect of care home acquisitions. With the age of living gradually increasing, more people are spending their twilight years in residential care homes. Some consider that acquiring a care home is a lucrative investment, providing a steady source of income. If this is something that you are contemplating, what do you need to bear in mind and what are the next steps?

Firstly, it is crucial that you have good legal representation (us!) to guide you through the acquisition process from start to finish. The process can be lengthy and may well take over a year. Where do you start?

Step 1 – Assets Deal or Share Sale?

If you are thinking of acquiring a care home, it is important to know precisely what you are acquiring. Will the acquisition be a business acquisition of the assets of the home (Assets Deal) or of the shares in the Company that currently runs it (Company Sale or Share Sale?) This is not as simple as it sounds, and the difference can make a big saving (or extra cost) in the acquisition for example with Stamp Duty vs Stamp Duty Land Tax (SDLT).

If the proposed transaction is an Assets Deal, the Buyer will acquire the main assets of the business (such as the property itself, equipment and employees) by way of an acquisition agreement.

If it is a Share Sale, then the same assets would normally still be involved, but it would be usual for the company in question to own all of the assets, be the employer of the staff and be registered with the Care Quality Commission (CQC) as the provider of services. In this instance, the shares in the company will be sold, rather than the individual assets which will remain in the ownership of the company. It’s the company that will be changing hands.

It is imperative that you obtain legal advice before signing anything, so that you are confident that you are making the right decision. Fees (such as professional fees and tax) can vary considerably, depending on whether you are acquiring assets or shares. It is definitely worth having a discussion with your accountant to compare your options and ensure that you are proceeding in the most efficient way. If you do not have an accountant, we have contacts that we can introduce you to, should you wish.

Step 2 – Heads of Terms

Once the points above have been discussed and hopefully agreed, it is very sensible to have Heads of Terms drawn up to give a bullet point summary of the main terms of the deal. Having these drawn up early on can prevent any misunderstanding between the parties, and these terms will be the first thing we want to see when acting for a client who is buying or selling a care home. Heads of Terms are tailored to each client’s needs, and can include terms such as any exclusivity period and/or confidentiality.

Step 3 – Due Diligence

Whether it is a share sale or an assets deal, due diligence enquiries are essential to protect the buyer and ensure that there are no nasty surprises later down the line. In the context of a care home, enquiries raised are broadly about the property itself; regulations; staff; business related (i.e. contracts); accounts and tax; and any other specific enquiries.

We always recommend that the due diligence process is concluded satisfactorily from a buyer’s perspective before moving onto the sale agreement.

Step 4 – Acquisition Agreement

For an assets deal, this will be an Asset Sale/Purchase Agreement (APA) and for a share sale it is normally a Share Sale/Purchase Agreement (SPA). They are very different and will cover very different things depending on the way the deal has been agreed.

Both should contain warranties and provisions relating to potential claims. There is no standard APA or SPA, and specimens of all different types, quality and lengths have been sent to us over the years. Most sensibly worded agreements will be between 40 to 100 pages depending entirely on the specific deal agreed. For obvious reasons, it is the negotiation of the acquisition agreement that will take a lot of time and absorb a lot of the budget.

Step 5 – Disclosure Letter

A Disclosure Letter will normally be negotiated at the same time as the APA and SPA. In short, it is entirely likely that the warranties given by the seller will not be 100% accurate. It is in both the seller and buyer’s best interests for the seller to prepare a Disclosure Letter, which will cross-refer to the warranties and draw any pertinent points to the buyer’s attention.

The Disclosure Letter exercise is extremely important to protect both the buyer and seller from any costly litigation further down the line.

What Next?

After the above steps have been taken, the parties will move towards exchanging  and completing the deal and carrying out post-completion steps. Completion Accounts (if any) will need to be prepared, along with any warranty claim or a claim under the Tax Deed.


rhw Solicitors in Guildford (logo) If you are considering the acquisition of a care home, rhw’s corporate and commercial department would be happy to guide you each step of the way.

Contact rhw Solicitors in Guildford on 01483 302 000 today, complete our contact form, or email guildford@rhw.co.uk to discuss your proposals and the next steps.