Top Quality Care Closes the Deal; Inside a Deal in Association with Muckle LLP in the Recent Pounds 24m Sale of Stonelea Healthcare, Legal Advisers Muckle LLP, along with KPMG LLP, Structured the Negotiations in Such a Way as to Maximise the Price and Minimise the Problems
Byline: Anna Peysner
IT IS currently a sellers' market in the care home sector, with consolidation driving higher prices.
Larger companies are buying up smaller independent operators in order to build up national operations with the independents offering "flagship" assets and practices and where subsequently independent and larger corporates can benefit from economies of scale.
But this is in its early stages, with even the larger companies still only representing a modest percentage of the total market.
County Durham company Stonelea Healthcare was particularly well-placed in this buoyant market, having three prime properties and an excellent management team.
The company was built up over 20 years by John Harris, who had the homes built in Easington and Seaham.
He says: "In 2002, the Government brought out new national minimum standards for care homes.
"At Stonelea our policy was to exceed those standards and to provide top quality care and to look after those folk in a way that I would expect my mum and dad to be looked after."
All three homes provide single occupancy with en suites and in County Durham's recent quality rating of care homes, they have been rated grade one, the highest possible. This emphasis on standards meant all three homes enjoyed more than 95% occupancy.
This made the company an attractive target for any buyer when John Harris put it on the market last April.
Through his corporate finance adviser KPMG LLP, John was introduced to commercial law firm Muckle LLP, which had considerable experience of the care home sector, having recently advised on the sale of Hadrian Healthcare Group.
Given the strong interest likely to be shown in Stonelea by potential buyers, Muckle LLP and KPMG LLP advised the circulation of an information memorandum to possible buyers, who could then be invited to learn more about the company in a data room.
This is an arrangement whereby all the relevant information and documentation about a vendor company is held in one location, where it can be inspected by potential buyers. It includes historical financial accounts, material contracts, licences and similar information. This allows the buyers to get a greater degree of relevant information at an earlier stage to make an informed bid.
Nicola Loose, associate in Muckle LLP's corporate finance team, says: "With a data room, potential buyers come in and inspect the relevant information and make an offer on that basis.
"Having a data room not only helps eliminate possible problems later on, it helps maintain a competitive atmosphere because the buyers know that other people are bidding."
A number of companies submitted bids on the strength of the data room, of which two were chosen to go through to the next stage and of those, John Harris chose European Care Group for exclusive negotiations.
"I felt it was the best deal for me," he says, "but, just as important, I felt European Care Group represented the best deal for the business and for the employees. …