A GP practice may consider undergoing a ‘merger’ for a variety of different reasons. One common trigger is that a single-handed GP is looking to retire. Alternatively, two practices may be looking to join forces to save costs, share resources and provide new services. Historically, all such transactions have been referred to as ‘practice mergers’.
However, if the two parties involved have no intention of being in business with each other for any longer than is necessary to transfer the GP practice to new ownership, then the transaction is really more akin to a takeover or acquisition than a merger.
NHS England (NHSE) recently published policy guidance on such transactions, which makes a distinction between a ‘merger’ and a so called ‘partnership change’. This has become an important issue for practices to be aware of since transactions which are in substance acquisitions are treated differently from those which are true mergers. NHSE will normally need to be involved in all ‘practice mergers’ at some point and if you start off down the wrong track it can be difficult and expensive to unwind things.
The difference between a ‘merger’ and a ‘partnership change’
One key difference between a ‘merger’ and a ‘partnership change’ is the interests of the parties involved.
If the substance of the transaction is an acquisition, such as our earlier example of a retiring GP, they will want to offload as many of their liabilities as possible - ideally all of them - while minimising any exposure to future risk. They’ll also be looking to maximise the value of their assets before they are transferred and will have no interest whatsoever in the acquiring business.
By contrast, in a merger, both parties will have a continuing interest in the other’s business, and will want to work successfully together in partnership. They will want to understand the risks and liabilities associated with each practice and important questions will need to be addressed, such as who will be liable if an issue emerges with one of the legacy businesses. Would it be the future partnership? Or one, or all, of the partners in the legacy practice?
Why is this important?
Historically, NHSE was content to ignore the differences between a merger and an acquisition and the details of how each transaction was to be structured was largely left up to the parties. NHSE largely confined itself to enquiring whether or not the GMS/PMS contracts were to be merged. However, in a paper published in January 2016, different processes were set out depending on whether the transactions was a ‘merger’, a ‘partnership change’ as well as whether the contracts were to be merged.
For GP practices, most of whom tend to refer to all such transactions as mergers and often head up their business plans as such, this can lead to problems. NHSE can insist on things happening that the parties may not want, such as requiring all partners go on each other’s contracts – not something that will be intended in the case of a retirement.
Seeking the right advice
NHS England will often ask practices to set out their merger plans in a business case. This is a key time to get advice to ensure the plans adopt the right language and align to the desired process.
The practices are also well advised to agree a ‘Heads of Terms’ at an early stage in their merger talks. This sets out the substance of the deal, provides an initial timeline, identifies the known key issues, identifies the correct NHSE processes, and ensures that everyone is aligned in their expectations before spending too much time and money.
Practices then need to consider other matters such as whether the staff need to be transferred under Transfer of Undertakings (TUPE), what changes are needed to CQC registrations, the implications for premises funding and more. Whether they are called ‘mergers’ or ‘partnership changes’ such transactions are complicated and are best undertaken with expert legal assistance.
For more information about mergers or partnership changes, or for any other enquiries, then please contact Daphne Robertson on 01483 511555 or email [email protected]