In the latest episode in our ‘How to sell a business’ series, Dru speaks with Gold Coast Business Broker Belinda Packer about selling a NDIS business in Australia.
Belinda has sold a number of NDIS businesses in the past few years and she draws on these transactions to provide advice for prospective sellers. A few key takeaways from the conversation between Belinda and Dru were:
Deal Structure – NDIS Licenses
Prospective buyers of NDIS businesses are typically looking for the NDIS registrations that the business is operating under to carry over. The best strategy to achieve this outcome is doing a share sale agreement instead of a standard business/asset sale. This way the licenses transfer alongside the business assets and the new owner can continue to operate without disruption.
When exploring selling, it is recommended that NDIS business owners check with their accountants to see whether or not their licenses are held in a transferrable structure. For example, licenses held in a discretionary trust would not be transferrable while licenses held in a unit would be.
Sale Price Maximisation – Management Team
When comparing different NDIS sales, Belinda commented that the businesses who had a management team in place sold for a significantly higher price than the businesses where the departing owner was the manager. NDIS businesses run under management are attractive to a larger pool of people bringing the multiple and therefore price up.
Sale Price Maximisation – Diverse Client Base
A common issue with NDIS businesses is that one or two clients are responsible for a significant portion of their revenue. In this circumstance, many buyers will either discount or completely exclude this revenue when completing their forecasting and due diligence. Classing the revenue too risky to include in a forecast, which brings their offer down.
The ideal business to buy would have a diverse spread of clients across different services so future earnings are less risky. No client worth more than 20% of total revenue.
Buyer Profile
While there is definite interest from private equity firms for larger NDIS businesses and individuals for small operations, the most common buyer in this space in the current market phase is an industry buyer looking to grow via acquisition.
If you’re an NDIS business owner who would be interested in learning more about exiting, please don’t hesitate to schedule a complementary consultation with our team.
