How to achieve a successful aged care divestment

Minimise impact, maximise outcomes

Divesting an aged care business is a significant strategic decision which requires proper planning to minimise impact to residents and care recipients while maximising the outcome for the provider.

Providers considering an exit from aged care services can plan for success using a proven framework: agree the transaction objectives, prepare a plan and timeline, get organised and put together a team.

1. Agree the transaction objectives

The provider’s board should agree its current status, future strategic direction and motivation for the sale.

Understanding the objectives for the transaction is an important first step to determining the best approach, including but not limited to:

• having an informed view of the assets tabled for sale and the relevant market

• structural impacts of various options on residents, client recipients, employees and other stakeholders such as financiers and the Department of Health and Ageing

• tax implications of various alternatives.

A measured approach will help to guide the board’s decision-making process about whether the divestment will likely achieve its strategic purpose as you begin to engage with interested parties.

The board can then plan for honest communication with government, employees, residents, their families and the community regarding the intention of the provider to exit aged care services and the process. This should aim to inform people about the planned changes to bring them along the journey.

2. Prepare a plan and timeline

To assist with a smooth sale, it is helpful for a provider to set out the series of steps with target dates, which can be used by the board and executive as a roadmap to follow throughout a transaction process.

The use of a roadmap can help clearly inform and communicate the significant effort that is required to effect a sale and target realistic deadlines, acknowledging that once in the market not everything is within your control.

3. Get organised

Not only does presenting the key information in an accurate and easy-to-interpret manner build credibility in the eyes of a potential purchaser, proper preparation will inform the board and management of likely value drivers to maximise value and the key issues that may arise regarding saleability.

We always recommend looking at your business ‘through the eyes of the buyer’ by conducting internal due diligence ahead of time. Issues are then known and quantified before an external party finds these and uses them to negotiate on price, or walks away.

Presenting information to interested parties in an online central location (best done with the use of a virtual dataroom hosted by a specialist provider) can help a provider to manage privacy and facilitate Q&A with multiple interested parties. Importantly, it also keeps a record of the relevant disclosures and negotiations regarding warranties and indemnities provided by sellers.

4. Put together a team

A divestment process will be disruptive to clients and residents and place additional demands on management, so providers should plan to increase management capacity when undertaking a transaction by drawing on external professional advisers to run the transaction process.

Transaction advisors can assist with preparing a transaction roadmap, fact checking information for interested party due diligence, compiling and managing a virtual dataroom, and assisting in negotiations with interested parties. In some jurisdictions where property is involved, a registered real estate agent may also be required.

Once negotiated, a transaction should be documented to give legal effect to the transaction, ideally by lawyers with aged care experience, who understand the unique commercial and regulatory environment.

Increase the chance of a successful transition of the business to an incoming purchaser by setting a clear transaction objective – planning and preparing for the process will mitigate surprises that can disrupt transactions and impact value.

Article originally published in ACCPA Aged Care Today Magazine, Page 89