Providing Due Dilligence for a Care Home Purchase
Care Dorset, which provides adult social care services in Dorset, was considering the purchase of a 66-bed nursing home to help meet local needs. To fund the purchase, Care Dorset required a loan from Dorset Council. As a result, Dorset Council engaged 31ten to provide due diligence around the proposed loan and acquisition.
The Role
31ten’s team of specialists across property, social care and financial modelling provided assurance and advice to Dorset Council. Our team worked at pace to bring together these specialisms in a review of the proposed transaction for the Council. We gave comprehensive strategic advice to the Council, identifying key areas of risks and potential mitigations, undertaking bespoke financial modelling to ensure that Councillors and senior managers were effectively informed when making decisions.
31ten investigated the key risk of Care Dorset defaulting on its loan to the Council by modelling scenarios and sensitivity analysis. This analysis included coverage ratios and key metrics of operating the new care home to evaluate the default risk.
The acquisition’s value for money was also considered by comparing the proposal to a scenario where the council builds a new care home instead. This included looking at the efficiency (cost per bed) as well as the payback period.
31ten also conducted a wider review to highlight key risks surrounding the proposed terms of transaction. Areas of focus included financial impacts, such as lease clauses relating to opex costs, as well as practical considerations. These areas included:
- Lease Review
- Contracts & Trading Agreements
- Warranty & Indemnity Position
- Employees & Pensions
Key Outcomes
31ten’s analysis provided Dorset Council with a clear view of the risks and opportunities of the proposed deal, enabling it to make an informed decision on how to proceed, including areas for further negotiation.
