Sale of optician business
Selling an optician business can be an exciting and stressful time. In our experience, even very similar looking businesses on paper can give rise to very different experiences for a buyer and seller. There are a number of factors to consider which we briefly look at below.
Legal issues when selling an optician business
Some of the legal issues to consider with the sale of optician business are:
- Reasons for the optician business sale. It can make a massive difference in the approach of the solicitor acting for the optician selling his business if the sale is retirement or succession planning on the one hand, or for financial reasons on the other.
- Whether the seller of the optical business has any outstanding finance that needs to be repaid from the sale proceeds. For example, loans to the bank, optical equipment on lease terms, guarantees to the landlord of the premises. Someone buying an optician business will want to know whether all the optical equipment has been paid, and if not, how much finance is outstanding.
- Has the seller of the optician business complied with its statutory obligations relating to the employees? The process to establish the seller’s compliance with employment laws will be part of the due diligence process for the buyer.
- Are the locums of the optician business genuinely self-employed? We have seen situations where on completion of the sale of an optician business, locums who were dismissed (but effectively had been working full time), bring an employment based claim for unfair dismissal.
- Whether the buyer of the optician practice is intending on changing any employment terms of the employees e.g. to harmonise terms with any other employees they employee. Making changes to the terms of the employment of employees is likely to be regarded as “measures” for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006. When selling a business, the seller needs to question the buyer’s intentions, as the seller will need to consider whether it needs to conduct pre-sale consultations with staff. Running a consultation can be an extensive (and expensive) exercise.
- If the optician business conducts NHS work under a General Ophthalmic Services Contract, then how long will be required in order for the optician buying to get a new contract? What happens in the intervening period?
- In respect of the premises, any prudent buyer of an optician business, will want to carefully consider whether the purchase of the optician business can provide for a profitable return on investment. The report on the lease is therefore going to be a critical component in the financial viability for the buyer. Indeed, if a bank is providing finance for the purchase of an optician business, then they may require a certain minimum length for the duration of the lease.
Legal stages when selling an optician business
The main legal and commercial stages when selling an optician business tend to include the following areas:
- The optician selling his business appoints an agent to find a buyer. There is an initial review of the optician business in order to provide marketing particulars, and obviously assess the asking price. We recommend for the seller of the optical practice to appoint a solicitor early on. If there are any items of “house-keeping” then these should be attended to facilitate a smooth due diligence process. If there are skeletons in the cupboard (and the prudent person buying an optician business will find them), then these should be identified and dealt with appropriately.
- An agent is appointed to find a buyer. There is an initial review of the optician business in order to provide marketing particulars.
- If an interested buyer makes an acceptable offer to buy the selling agents will take the business off-the-market. Sometimes a deposit (which may or may not be refundable) is required to be paid to the agents.
- An exclusivity agreement may be put in place between the seller and buyer of the optician business.
- The accountant and solicitor acting for the buyer of the optometry business conduct due diligence to identify risks and liabilities. If significant liabilities are discovered then the buyer of the optometrist business may seek to negotiate a reduction to the purchase price, or ultimately walk away from the transaction. Typically this process can run from a few weeks to a number of months.
- The sale and purchase agreement is prepared and negotiated. Invariably this will involve liaison with the solicitors acting for the landlord of the optician practice premises. Typically this process can also take a few months to a number of months.
- The deal is completed.
Investigating the optician business
When buying an optician practice, the law will provide very few protections as standard. The old legal saying ‘buyer beware’ is still very relevant in this area of the law. Accordingly if you are selling be prepared to have to spend a fair degree of time having to complete extensive due diligence questionnaires.
If a buyer is not satisfied with the due diligence then buyer may walk away from the transaction, or look to negotiate warranty and indemnity protection in the sale and purchase agreement.
Legal advice for opticians and the role of the solicitor
Where we are appointed as the lawyer for opticians to act on the sale of an optician business we have the following key roles:
- First considering what pre-sale agreements may be required. For example, a confidentiality agreement and some form of non-refundable deposit agreement.
- Second, assisting with the answers to the due diligence questions.
- Third, advising on and negotiating the terms of the actual sale agreement. They key areas will be:
- Making sure the seller gets the cash (or other sale consideration) agreed, especially if some of the cash is payable based on future performance of the business or deferred payment terms.
- Managing the post-sale liability of the seller of the optician business against any warranties, representations or indemnities in the sale agreement. A warranty is a statements of fact about the business, which if inaccurate will technically give the buyer of an optician business a means of legal redress. Often the warranties will form the bulk of the sale agreement. Sometimes the solicitor acting for the buyer of the sale agreement will provide warranties which are completely disproportionate for the size of the transaction and issues, thereby creating considerable risk following the sale. It cannot be understated enough how important the legal advice from the solicitor acting for the person selling the optician business will be in this area.
- Managing any other responsibilities for the seller of the optician business. For example, non-compete restrictions, and any post sale consultancy assistance.
Contact us
For more information please Spencer Laymond on (07974) 432579 or email at spencer@peterbrown-solicitors.com.