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Glossary

Selling a business,in plain English

A

Adjusted EBITDA

Your profit before interest, tax, depreciation and amortisation, corrected for anything that will not carry on under a new owner. Typical corrections add back one-off costs and any salary or perks paid to the owner above a normal rate, and take off the cost of a manager to replace the owner if the owner currently runs the business without being paid for it. Buyers apply their multiple to this figure, so it is usually the single number most argued over in a sale.

Asset sale

A sale where the buyer purchases the business and its assets (equipment, contracts, goodwill and often the property) but not the company that owns them. The seller keeps the company, with its history and any liabilities, and the buyer starts afresh. In care, an asset sale means the buyer needs its own CQC registration before it can take over, which usually adds time.

Asking price

The figure a business is first marketed at. It is the seller's opening position, and the price actually paid at completion can be higher or lower depending on how many buyers compete and what due diligence finds.

B

Business Asset Disposal Relief (BADR)

A tax relief that reduces Capital Gains Tax on the sale of a trading business or shares in one, provided the seller meets the qualifying conditions, which include having held at least 5% of the shares and been an officer or employee for two years before the sale. Since April 2026 the rate is 18% on qualifying gains, up to a lifetime limit of £1 million. Your accountant confirms eligibility; we are not tax advisers.

Buyer register

Our standing list of buyers who have told us what they are looking for, by sector, size and region. It lets us put a business in front of suitable buyers quickly and confidentially when an owner decides to sell.

C

Cash-free, debt-free

The basis on which most offers are made. The buyer pays a headline price for the business as if it had no cash and no borrowings; the seller then keeps any surplus cash and repays any debt out of the proceeds. Two offers that look the same can leave very different sums in the seller's bank account depending on how much cash and debt the company holds at completion.

Completion

The day the sale legally happens, the money is paid and ownership passes to the buyer. In care, completion is often timed around the CQC registration or notification steps.

Completion accounts

A set of accounts drawn up at completion to check the cash, debt and working capital the buyer is actually receiving, with the price adjusted up or down to match. The alternative is a locked box (see below).

CQC registration

Registration with the Care Quality Commission, which every provider of regulated care in England needs. In a share sale the registered provider stays the same company, so the registration continues and CQC is notified of the change in who controls it. In an asset sale the buyer must hold its own registration for the service before it can take over.

D

Deferred consideration

Part of the price paid after completion, on fixed dates. It differs from an earn-out because the amount does not depend on how the business performs after the sale.

Disclosure letter

A letter from the seller to the buyer, given at completion, that lists exceptions to the warranties in the sale agreement. Anything properly disclosed cannot normally be the subject of a later warranty claim, which is why sellers are advised to disclose fully.

Due diligence

The buyer's investigation of the business before it commits: the accounts, contracts, staff records, CQC history, property and anything else that affects value or risk. It usually runs for several weeks after heads of terms are agreed, and most price reductions in a sale arise from what it finds.

E

Earn-out

Part of the price that is only paid if the business hits agreed targets after the sale, usually over one to three years. Buyers use earn-outs when they are uncertain about future profit; sellers carry the risk that the targets are missed, sometimes for reasons outside their control once they no longer run the business.

EBITDA

Earnings before interest, tax, depreciation and amortisation. It is a measure of the profit the business makes from trading, before the effect of how it is financed or how its assets are written down. See adjusted EBITDA.

Enterprise value

The value of the business as a whole, before cash and debt are taken into account. It is the figure a multiple of EBITDA produces. Equity value, the amount the shareholders actually receive, is enterprise value plus cash minus debt.

Exclusivity

A period, usually agreed in the heads of terms, during which the seller agrees not to negotiate with other buyers while the chosen buyer carries out due diligence. It typically runs for six to twelve weeks.

F

Fee mix

The split of a care business's income between residents or clients who pay privately and those funded by a local authority or the NHS. Private and higher-paying funding usually supports a higher price, because it is less exposed to council rate decisions.

Freehold and leasehold

A freehold care home owns its building and land outright; a leasehold home pays rent to a landlord. The multiple values the trading business, which for a freehold home means its profit after a fair rent for the building, otherwise the building would be counted twice, and the building is then valued separately and added on top. Two homes with the same profit can sit in very different buildings, from a well-kept purpose-built home to an older property that needs major work, and a single multiple cannot reflect that. Asking prices on our Market Index are quoted as advertised, and for a freehold home they usually include the building. A leasehold home's value depends heavily on the length and terms of its lease.

G

Goodwill

The part of a business's value that comes from its reputation, client and resident relationships, staff team and earning power, above the value of its physical assets. In home care, where there is no building, almost all of the value is goodwill.

H

Heads of terms

A short document setting out the main terms of a deal (price, structure, timetable, exclusivity and key conditions) once a buyer and seller have agreed them in principle. It is mostly not legally binding, apart from clauses such as confidentiality and exclusivity, but it frames everything the solicitors then draft.

I

Information memorandum

The document that presents a business to serious buyers once they have signed a non-disclosure agreement. It covers the history, services, staff, finances, regulatory record and the opportunity for a new owner.

L

Locked box

A way of fixing the price using a recent set of accounts. The buyer takes the economic benefit and risk of the business from that date, and the seller promises that no value has been taken out since, other than amounts agreed in advance. It gives the seller more certainty over the final figure than completion accounts.

M

Management accounts

Monthly or quarterly accounts prepared for the business's own use, more recent and more detailed than the annual statutory accounts. Buyers ask for at least the last twelve months, and their quality has a direct effect on how confidently a buyer can price the business.

Multiple

The number a buyer multiplies a business's adjusted EBITDA by to reach its value. A business valued at five times £200,000 of adjusted EBITDA is worth £1 million. The multiple reflects risk and quality: CQC rating, occupancy or contracted hours, fee mix, staff stability and how dependent the business is on its owner.

N

Non-disclosure agreement (NDA)

A confidentiality agreement a prospective buyer signs before receiving the business's name or detailed information. In care, where staff and residents can be unsettled by rumours of a sale, it is the first thing any buyer signs.

Normalised working capital

The level of day-to-day funds (money owed by funders and clients, less money owed to suppliers and staff) a business needs to run normally. Sale agreements often set a target, and the price moves up or down if the actual figure at completion is above or below it.

O

Occupancy

The share of a care home's registered beds that are filled, usually measured as an average over recent months. It is one of the first figures a care home buyer asks for, alongside the weekly fee.

P

Price per bed

A quick check buyers and lenders use on care home values: the total price divided by the number of registered beds. It is used to test a valuation reached on earnings, rarely as the valuation itself.

R

Registered manager

The person registered with CQC as responsible for managing a regulated service day to day. A settled, well-regarded registered manager who will stay after the sale makes a business noticeably easier to sell.

Retention or escrow

Part of the price held back, usually with a solicitor, for an agreed period after completion to cover potential warranty claims or adjustments.

S

Seller's discretionary earnings (SDE)

Profit plus the owner's own salary and benefits, used to value small owner-run businesses where the owner is also the main worker. It is not the same figure as adjusted EBITDA, which deducts a fair cost for someone to replace the owner, so the multiples applied to each are not interchangeable.

Share sale

A sale where the buyer purchases the shares in the company that owns the business. The company, its contracts, staff, CQC registration and history all stay in place, and only the owner changes. Most home care agencies are sold this way.

Share purchase agreement (SPA)

The main legal contract in a share sale, setting out the price, how and when it is paid, the warranties the seller gives and what happens if they prove untrue. The equivalent in an asset sale is the asset purchase agreement.

T

TUPE

The Transfer of Undertakings (Protection of Employment) Regulations, which move employees to the new owner on their existing terms when a business is sold as an asset sale. Employers must inform, and in some cases consult, staff before the transfer. In a share sale TUPE does not apply, because the employer stays the same company.

V

Valuation

An estimate of what a business would sell for, reached by applying a market multiple to its adjusted earnings and testing the answer against recent sales and, for care homes, the property. Stone & Co prepares a full valuation free of charge for owners thinking about selling.

W

Warranties and indemnities

Statements of fact about the business that the seller gives in the sale agreement, such as the accuracy of the accounts or the absence of disputes, and promises to cover specific losses. If a warranty proves untrue, the buyer may be able to claim money back, which is why careful disclosure matters.

Warranty and indemnity insurance

Insurance, usually bought by the buyer, that covers claims under the warranties instead of the buyer claiming from the seller. It is becoming more common in larger care deals and can allow a seller to leave with less money held back.