Purchasing a business is exciting. However, there are key legal and commercial considerations to be aware of from the outset in any purchase. Although the legal stages of purchasing a physiotherapy business are similar to purchasing any other business, there are some particular considerations to keep in mind. Of course, as with any business purchase, it is also important to conduct legal and financial due diligence

In this article, we explain the key considerations when purchasing a physiotherapy business. 

Lease

The location of the physiotherapy business likely contributes to its success. As the purchaser of an existing business, it will be important to continue to occupy the same premises. Doing so will help you to retain existing customers. There are two options for taking over occupation of the premises on the settlement date. You can choose to either:

  • transfer the lease; or
  • enter into a new lease.

If you are transferring the lease, the previous business owner (the vendor) assigns their rights under their current lease to you by way of a deed of assignment

The premises may also be under a sublease or a licence, which is typically the case for physiotherapists who operate within a medical centre. Similar to a normal lease that you can transfer, the vendor can transfer or assign their rights under a sublease to you. However, if the vendor is occupying the premises under a licence arrangement, you will need to enter into a new licence to occupy agreement with the licensor. 

Whichever situation applies, you will need to obtain consent from the landlord. It is common for the landlord’s lawyer to prepare the relevant lease documents for you. Typically, you will need to pay for this. Once you receive the documents, it is important to have an experienced lawyer review the lease and, if necessary, amend it. You should ensure that:

  • you understand your obligations under the lease; and
  • it is appropriate for your business. 

Client Information 

Retaining existing customers is important for any business. This is especially the case for a physiotherapy business. Therefore, if the physiotherapy business you are purchasing maintains a client list or customer database, you should make sure this forms part of the sale. 

Privacy Considerations

A physiotherapy business that is transferring its customer database will need to comply with Australian privacy laws. Under the law, specific requirements apply to the transfer of personal information during a business sale. As such, you should ensure that you comply with these requirements during the sale. It is common and good practice for the vendor to:

  • de-identify any customer information that they provide to you during the due diligence process; and 
  • only disclose personal information necessary for you to assess the business.

Generally, the vendor may not need to seek consent from their customers to transfer their personal information if you:

  • are an APP entity or about to become one as a result of the purchase (i.e. an entity that must comply with the Privacy Act); and
  • are purchasing the business as a going concern; and
  • plan to use the information in the same way and for the same purpose as the vendor.

However, in some instances, the seller may have to obtain customer consent. This will likely be the case where you plan to use the information differently after the sale. 

Equipment 

Most physiotherapy businesses will have equipment, such as treatment beds. As the purchaser, you should learn whether:

  • the vendor owns the equipment outright; or 
  • it is financed. 

If the vendor owns the equipment outright, it should form part of the sale and the purchase price. If the equipment is leased, the sale of business contract should specify whether:

  • the vendor will pay out any outstanding finance amount prior to completion and transfer ownership of the asset to you; or 
  • the lease will be transferred to you when you take over the business. 

Ongoing Contracts 

Contracts With Clients or Suppliers

The physiotherapy business may have ongoing contracts with clients or suppliers that will make up part of the returning revenue of the business. 

For example, the business may have an ongoing relationship with a sports club to treat the players throughout the season. As the purchaser, you should review the contract with the sports club and ensure that it will transfer to you after completion. If there is no contract in place you, should look to prepare one with your lawyer.

Employee Contracts

As the purchaser, a key consideration is whether you will keep on the business’ existing employees. If you agree to purchase the physiotherapy business and keep on its employees, you will need to re-employ the employees under your company. When you take on the existing employees, you should ensure that they have the appropriate physiotherapy accreditations. 

You will also need to honour any employee entitlements, such as:

  • personal leave;
  • existing working arrangements; and 
  • parental leave. 

There are some employee entitlements that you do not need to recognise, however. During negotiations with the seller, you may agree that the seller will pay out these entitlements prior to settlement. 

Other Considerations

Medicare

Physiotherapy businesses are classified as allied health care providers. Medicare registration will be an important step when buying a physiotherapy business, because clients can claim healthcare rebates as part of their healthcare plans. 

Intellectual Property 

Intellectual property (IP) is crucial to any business. IP includes:

  • the business name;
  • the domain name;
  • any social media channels;
  • marketing materials;
  • trade marks; and
  • the content on the website.

During your due diligence, you will need to determine who owns the IP in the business and whether the seller is able to rightfully transfer these assets to you.

Key Takeaways 

Purchasing an existing physiotherapy business may be less risky than starting up a new practice, as the business will come with an existing client base and working practice. 

When purchasing a physiotherapy business, you should consider:

  • which assets are included in the sale;
  • how the lease, sublease or licence will continue after settlement;
  • which contracts the business has (e.g. medicare and terms and conditions with patients); and
  • how you and the vendor will need to comply with the law when transferring the personal information of patients. 

If you have any questions about purchasing a physiotherapy business, contact LegalVision’s business purchase lawyers on 1300 544 755 or fill out the form on this page. 

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