You Have Decided to Sell Your Childcare Center. Now What?
Selling a childcare center can feel daunting even for the most seasoned business owners. Owners may be approached by potential buyers with unsolicited offers or owners may seek their buyers out. In any case, understanding key documents, stages, and potential challenges is essential for a successful transaction. Sales of this nature come with intricacies that may prove difficult if you are not equipped with a proper team of financial and legal counsel to handle the “ins and outs” of the transaction.
Secrecy Pact
When selling a business like a daycare, it’s crucial to maintain confidentiality to safeguard your reputation and protected records. All of your information should remain confidential and be shared only between yourself, the buyer, and their respective legal/financial advisors. A confidentiality agreement or Non-Disclosure Agreement must be signed by the buyer.
Great Minds Think Alike
A Letter of Intent (“LOI”) should be executed between you and the purchaser to ensure each parties expectations and intentions align. The LOI will set forth the deal structure, purchase price, employment terms, non-competes, real estate and leasing matters, and any other terms important to you or the buyer. This is a non-binding agreement. But it helps to guide the later stages of the selling process.
Fact Finding
Due diligence is the time the buyer (aided by their legal and financial advisors) will examine your facility’s accounting and tax records, including books, documents, and asset-related paperwork. This review aims to verify the cleanliness of asset titles and ensure accuracy in financial reporting. The buyer will want to uncover any potential issues that may impact the transaction process.
The Purchase Agreement
After all terms have been agreed upon by all involved parties, the Asset Purchase Agreement (“APA”) is prepared by your legal counsel. Both you and the buyer will sign the APA and it will become a binding transaction.
Following the Rulebook
After the execution of the APA, the buyer will want to ensure that all childcare licensing forms are prepared (usually with the assistance of a licensing consultant) to comply with regulatory standards.
Sealing the Deal
Congratulations- you have made it to closing! The closing and transfer of ownership are the final steps involved in selling your business. All remaining matters are to be prepared and finalized. If there is a landlord or franchisor, you must receive their approval. A specific date needs to be established, marking the point where all funds received by the center belong to you, the owner, and all funds received thereafter belong to the buyer.
Selling your childcare center requires careful consideration and strategic planning in each phase. From maintaining confidentiality to finalizing the purchase agreement, utilizing the right team is important for a successful transaction.