For most people, whether they are sellers or buyers, a sea-change in the status and ownership of their business may be the most important transaction in their working lives - with implications for income, lifestyle, pension pot, retirement and inheritance.
Being more than just a service provider
Those who have been through such a process will readily agree that there is considerable personal stress involved, often through having the twin objectives of keeping the business moving forward while driving the best agreement. In such circumstances the role of the solicitor assumes a greater magnitude than in almost any other set of business conditions, often beyond that solely of legal advisor and into the realms of personal confidante, liaising not only with other solicitors but also both sets of accountants and business agencies which specialise in advising clients on mergers, acquisitions and disposals.
The plethora of matter arising from such a strategic business move can present a real challenge, even for experienced senior executives, particularly if they are part of the leadership team in a small business. In such circumstances shareholders/directors often do not have the backing of a qualified support team in-house. For such people, there is considerable reassurance to be had if the legal advice received is not only enlightened by expert knowledge of relevant commercial law but also by experience of the sector in which they work; its terminologies, its working practices, the prevailing market conditions and the figures that will constitute a good result for the client.
Elements of the transaction such as the main contract, the due diligence processes involved; the necessary warranties sought by the buyer for the seller; the disclosure statement; potential HR and Health and Safety matters - all these can be helped along by familiarity with the operating environment of the businesses, its protocols and practises.
The private healthcare sector is a good example of this. At Neves Solicitors it's an area we have considerable experience of and we have been able to help clients achieve the proper financial rewards and personal financial security from the outcomes of business acquisitions.
A major market sector identified
A government report published as recently as November 2017 highlighted the significance of the care homes market, concluding:
"This is a hugely important sector, choices on care are an incredibly important decision taken by or on behalf of individuals who are often vulnerable"
It went on to report
"In the main, the CMA's (Competitions and Markets Authority) consumer research found that residents had received good care. The sector provides a vital public service that benefits many people and is staffed by many dedicated and caring individuals".
This latter conclusion is one that we at Neves Solicitors would heartily endorse and goes some way to explain why we have established such good relationships with those that work in the Care Homes market. We believe that determination to provide highly professional standards with a personal touch and a friendly face is something we have in common with clients in small to medium sized businesses, where the individual qualities of key personnel are recognised and allowed to flourish.
For those who own and run care homes this balance of sound business acumen and personal empathy would seem to be a real priority.
Data used by the Government's report, emanating from a variety of acknowledged official sources, puts the value of the care business sector at around £15.9 billion a year in the UK, with more than 410,000 residents in some 5500 different providers operating 11,300 care homes. It is clearly a very large market and with the ageing populating and an NHS under immense financial pressures, unlikely to experience a fall in demand. With the regulatory framework around LAs' legal duty to meet eligible people's needs, the mix of self-funders and those receiving funding will continue to affect the market. What is clear for the owners of businesses is that the balance between standards of accommodation, quality of care and financial viability always remains on the agenda.
In the UK, other elements such as Brexit, with its knock-on effect on staffing levels and availability of a suitable workforce must be taken into consideration. For some, the considerable demands of running a home will become more burdensome as they themselves look forward to retirement. Others will see the benefits both to residents and shareholders, in driving the sort of genuine economies of scale that may be achieved only through growth by acquisition.
A message to investors
An AMA research report into the Care Homes Market published in August 2017 said, "The introduction of the National Living Wage in April 2016 increased payroll costs and reduced profit margins". Nevertheless, it observed that "Despite the challenges facing the sector, the private care homes sector continues to perform and attract new investors."
It went on…
In a time of constrained public-sector finances, the private sector will play an important role in updating existing and delivering new care homes. Because of these factors, the care homes sector is set to outperform the wider healthcare market in the long term."
So, this is generally good news for those looking to enter or expand their involvement in the market. Growing and sustainable demand is always a beacon of optimism for investors. A significant upswing in mergers and acquisitions in this area of activity was first noted as far back as 2012, including the £825 million buyout of the Four Seasons Group and the move of Mitie, a FTSE 250 Company into the sector.
In a local case study, Neves acted for client A, who had previously sold a successful business within the care sector and decided in Q2 2016 to re-enter that space. Using our expertise, we assisted our client to purchase six businesses with 14 sites, including care homes and associated care businesses. This client is now positioned as a multi-million turnover business and we continue to assist them in all aspects of their commercial legal needs, acting quickly and efficiently, providing practical solutions.
If you are looking for a commercial solicitor, please get in touch with the team to discuss how they can help.