November 22, 2023

Preparing your children’s services business for sale

Selling your children’s services business, like selling a home, is an important and potentially difficult decision. It is one that will be affected by several factors, including timing, market challenges and the “saleability” of your business.

In our experience of acting for sellers of children’s services businesses, early-stage preparation is crucial and can help to ensure maximum return on the investment you’ve made into your business. There are a number of points that can be dealt with ahead of a sale to mitigate the risk of complications and/or delays during the sale process:

1. Build your transaction team

Taking advice from corporate finance advisers and corporate lawyers, ideally those who have relevant experience in the children’s services sector, is key. These advisers can work with you from an early stage to help your business achieve “maximum value”. They will advise you on the structure of the sale so that that the business goes to market with an efficient tax structure. You’ll need to consider aspects like whether the sale should be a share sale or an asset sale and the tax (and other) implications of either option.

2. Pre-sale “housekeeping”

During the sale process, the buyer’s lawyers and financial / tax advisers will conduct due diligence on the business. This is essentially a process whereby the buyer’s advisers will raise a series of financial, legal and tax enquiries to allow them to “kick the tyres” of the business. They will then report to the buyer on their findings.

To enable the sales process to run smoothly, it is advisable that any areas which could raise potential red flags are dealt with as far in advance as possible. We’ve summarised some commonly difficult areas below:

a. Change of control clauses

Your key supplier and customer contracts, including any contracts with the Local Authority or your leases, may contain change of control clauses. Such clauses will require the other party to the contract to be notified if there is a change of control in your business. Identifying any such clauses in advance of the due diligence process, and being prepared with a strategy to deal with them, can be helpful and allow the transaction timetable to remain on track.

b. Property leases

If your children’s services business relies on leasehold properties, the buyer’s advisers will inevitably want to review each of these leases. If they are not happy with the terms of such leases (e.g. if you have entered into an assured shorthold tenancy with a nominal notice period), the buyer may require these leases to be renegotiated prior to completion. Being on good terms with your landlord(s) can really help. If your business owns any freehold property, having any property documents and deeds to hand will be helpful.

c. Ownership of assets

The buyer will want reassurance that they are buying everything they deem necessary to run the business post-completion. If any assets, including the ownership of the business’s domain names or any supplier contracts, aren’t in the business’s name (e.g. they are instead in the seller’s personal name), they’ll most likely need to be moved into the business’s name prior to completion. Again, identifying any potential issues and dealing with them before taking your business to market can help reduce any complexities and assist from a timing perspective.

d. Protection of intellectual property (“IP”)

The buyer’s advisers will raise enquiries regarding the ownership of any IP used by the business, so it will need to be clear who owns this IP. It is also generally advisable for any IP that is capable of registration, including your business name and any logos used in the context of the business, to be protected via registration prior to sale.

e. Employment issues

The buyer’s advisers will pay close attention to your employment documents, namely the employment contracts. They will also raise enquiries regarding the immigration status of the business’s employees and whether any sponsorship licences are held and/or needed. The due diligence request will include enquiries on the right to work process and the monitoring / checks conducted by the business. If they are not satisfied with the relevant processes, the buyer will likely seek protection via specific indemnities for any identified employment issues. As such, it is good to get ahead of any issues and deal with them pre-sale.

3. Timing

Once you have accepted an offer from a buyer, it is sensible to agree a short “heads of terms” document. Heads of terms are essentially a non-binding framework for the transaction. They set expectations for timings and can clarify key points such as exclusivity, structure, the buyer’s expectations for the seller’s post-completion role (if any) and any conditions to the transaction.

Your lawyers and financial advisers will be instrumental in drafting and negotiating the heads of terms so it is important that you’ve built your transaction team prior to signing any heads of terms.

How we can support you

Our specialist Health and Social Care Team regularly advises providers of all categories on acquisitions and sales in the children’s services sector. We will work with you at the pre-sale stage and post-offer to achieve a structure that works for you, to advise on and minimise any risk points and to ensure that the transaction progresses as smoothly as possible.

If you have any queries, please do not hesitate to contact:


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