How to Sell Your Mental Health Residential/Supported Living Business

With over 60 years’ experience in health, social care and education, Phoenix is a specialist advisory business offering expert advice, guidance and support to help you through the process of selling your adult mental health residential and/or supported living services business.

From identifying everything you’ll need to ensure your business is ready for sale to the valuation of your business, this guide includes the most frequent questions we’re asked by people considering selling a mental health residential/supported living business.

1. What will I need to provide to ensure my business is ready for sale?

You’ll need to be able to provide:

  • The last 2 years of financial statements [annual accounts]
  • Management accounts for the period since the end of the financial year [if it’s more than 6 months since the financial year end]
  • Ability to demonstrate the quality of care your business provides e.g. positive CQC reports, service user & staff surveys and staff training records
  • End dates for any Local Authority [LA], CCG or other contracts

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2. Is it preferable to sell the shares of the company or the assets?

It’s usually preferable to sell the shares of the company if possible, as by selling the shares there’s no need to change the LA contracts, employment contracts for office staff and care workers, CQC registration or lease(s).

There are also significant personal tax benefits [entrepreneur’s relief tax at 10%] to be gained by selling the shares of your business.

3. How much is my mental health residential/supported living business worth?

The value of the business is normally calculated on a multiple of adjusted profits, and this multiple can vary dependent upon a number of factors, including geography, size of the business and the mix of contracts.

Also consider that there may be a further payment in lieu of the net current assets.

4. What information will the buyer want?

  • The financial performance [profitability] of the company
  • Details/copies of the existing service user spot/LA/CCG contracts, staff contracts, AST leases (assured shorthold tenancy) and management agreements i.e. hours per week, charge & pay rates, duration and terms
  • Types of services provided e.g. Schizophrenia, Schizoaffective Disorder, Bipolar Disorder, Anxiety Disorder, ADHD, Asperger’s, Personality Disorder
  • Number of care workers, shift pattern and number of office staff
  • Occupancy levels
  • Property details e.g. property type, position, internal and external photographs, freehold or leasehold and length of lease(s)

5. How long does the sale process take?

Normally 10 – 12 weeks assuming that most of the above information is readily available

6. How do I keep the sale process confidential?

Potential purchasers will sign a non-disclosure or confidentiality agreement before we share any information about your business with them. We will also ensure that meetings with potential purchasers are always conducted away from the office and/or often outside work hours.

Any contact with you is always via Phoenix and always via a sensitive and secure means, either by personal mobile phone or private email address.

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7. What costs will I incur?

A corporate finance advisor [e.g. Phoenix] charge an agreed percentage of the total sale price, which is paid on completion of the sale.

Depending upon the complexity of the company [e.g. number of employees, contracts, property leases etc.] a corporate solicitor will provide you with a fee quote in advance of starting the process. This is typically +/- 1% of the value of the sale.

Again, depending upon how up to date the financial information [annual accounts and / or management accounts] of the company is, you may also need to ask your accountant to provide additional support during the sale.

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8. Can I use my own solicitor and accountant?

The short answer is yes. However, it is imperative to check whether your own solicitor and accountant have experience of commercial healthcare and social care transactions, as this should make the sale process run more smoothly.

9. How much tax will I have to pay on the monies I receive?

Normally the sale of shares in a small / medium sized business will qualify for entrepreneurs relief which means you’d need to pay a one off tax charge of 10% of the net proceeds you receive from the sale.

10. Will the purchaser want to buy or continue to rent the offices/properties too?

This will depend on the individual purchaser’s requirements, but they’re often very keen for the business to continue to trade from the existing premises post sale.

Post sale the purchaser will wish to either agree to take on the responsibility for the existing lease/management agreement, enter into a new lease/management agreement for the existing premises or purchase the property.