Merger or take-over: Are you prepared?

First published in Practice Management in January 2023.

Justin Cumberlege, from specialist healthcare law firm Hempsons, provides some guidance if you are considering a merger or being taken over by another practice.

Have you considered that the practice might be better if it merged or was part of another practice? The more prepared you are, the greater the chance that everything will go smoothly and to plan, with no hidden surprises. On the other side, you do not want to pick up liabilities and problems which you never had before, and possibly do not have the knowledge of the history to deal with sufficiently quickly, especially if the partners from the other practice have retired.

Particularly if you think that you may only have a short window of opportunity, planning ahead will enable you to act quickly. That planning means having everything in order. Ensure that you know, and have the copies and evidence in tidy well labelled folders (electronically or physically) of all the records of the practice, including:

  • Property documents – freehold or leasehold titles, leases, mortgages and other deeds are complete and in the names of the correct people (e.g. current partners) and their shares in the property properly recorded in a declaration of trust;
  • Employment contracts – the contracts of all the staff are up to date and contain all their current employment terms, and you have letters with any changes, such as salary increases, bonuses, additional holidays, and holidays taken in the current year;
  • Details of employees are all up to date (any change of names, current qualifications and band, date of commencement of employment, date of birth, current home address);
  • Details of any staff matters are up to date, such as records of grievances raised or disciplinary matters, and how they were resolved, as well as details of anyone who left in the last two years;
  • The partnership agreement is up to date, is meaningful in respect of the transaction and the decision making required and has been signed by all partners, and dated;
  • Self -employed (locum) agreements are up to date;
  • GMS/PMS/APMS contracts are in the names of the current partners;
  • Contracts for supplies of goods and services, such as telephones and connectivity, HR support, waste disposal, photocopiers are available, and in the name of the practice or current partners and you know the termination terms, in case that is required on the merger or acquisition;
  • Accounts are up to date, and the past year’s accounts have been agreed, with any unusual items readily explained, and management accounts up to the end of the last month available;
  • Registration with the CQC, ICO and any other regulator is in order;
  • The value of the equipment and other assets of the partnership is known or can be quickly ascertained;
  • The practice is not over stocked with medicines, vaccines or stationary and the acquisition prices are at hand;
  • Any agreement with third parties is properly evidenced and what will happen after the transaction known or agreed, such as with the deanery for training or someone coming into the surgery to provide exercise classes.

Consider going through a due diligence questionnaire, and answering the questions, and getting together the evidence, and then filing it against the relevant question number.

If you find that there are matters incomplete, missing or plain wrong, the time to correct them is now, not when you are in the middle of a transaction to join another practice. Tie up your loose ends, seek professional advice from those with experience of such transactions, and the transaction will go through without consuming all your time and creating great stress.