Buying or selling a healthcare, medical, NDIS or aged care business involves several key deal stages, including early negotiations, due diligence, negotiating the sale contract, completing the sale and managing post-completion obligations. While every transaction is different, understanding these stages can help ensure a smoother transaction.
Early negotiations
When exploring a transaction, it’s important to establish what is actually being bought or sold.
Some transactions involve purchasing shares in a company that owns and operates a business. Others involve an asset sale, where the purchaser acquires business assets without acquiring the company itself. This distinction matters because the risks and legal requirements are very different, and not having clarity can derail a deal’s progress.
Exclusivity
The parties may agree on an exclusivity period where the seller agrees not to negotiate with other potential buyers for a specified time. This gives the buyer greater confidence to spend time and money on due diligence and other legal work, by reducing the risk that the seller ends up choosing another buyer.
Non-binding indicative offer
It’s common for parties to sign a non-binding indicative offer (NBIO) where they agree on key commercial terms before starting due diligence and contract negotiations. A NBIO can help establish whether parties are broadly aligned on matters like the purchase price, deal structure, completion date and other key terms before significant costs are incurred.
As the name suggests, the commercial terms in a NBIO are generally not intended to be legally binding. However, whether they are binding depends on the drafting, so careful drafting is essential to ensure the document achieves what is intended. Some terms such as confidentiality or exclusivity may be intentionally drafted so they are binding.
Due diligence
Due diligence is the stage where the buyer and their legal team investigate the business by requesting information and documents from the seller. In a health, medical, NDIS or aged care business sale, this process can help identify legal, commercial and regulatory risks. Depending on what is uncovered, the buyer may seek additional contractual protections, ask for issues to be resolved before completion or reconsider the transaction.
Contract for sale
One side, usually the seller’s lawyer, prepares a draft contract for sale, addressing matters such as the purchase price, deal structure, conditions to completion, warranties, indemnities, restraints and the parties’ obligations before and after completion.
The other side, usually the buyer’s lawyer, will advise them on the contract terms and usually seek to negotiate amendments to protect their interests and address any risks or concerns. There can be several rounds of negotiations before agreement is reached, but having a NBIO signed earlier in the process can help by establishing key commercial terms early on.
Completing the sale
Signing the contract doesn’t usually complete the transaction. The parties may need to satisfy conditions and prepare for transfer of the business which can include obtaining regulatory or third-party approvals, transferring contracts or leases, paying the purchase price, making arrangements for employees, and other steps to ensure the purchaser can assume ongoing operation from completion.
Post-completion
After completion, there may be some final actions, such as updating records, completing registrations or notifications, transferring remaining assets or contracts, and dealing with post-completion adjustments.
The sale contract may also impose ongoing obligations, such as transitional assistance from the seller, restraint obligations or claims under warranties and indemnities.
Getting the right team
When buying or selling a healthcare, medical, NDIS or aged care business, it’s important to have advisers who understand both M&A transactions and the regulatory issues specific to the sector. If you’re considering a sale or acquisition, contact our team for legal advice on deal structuring, due diligence, contract negotiation and completion.
This blog post does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to you. Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.
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