Medical transport company due diligence

Under a letter of intent, a buyer of a medical transport company is trying to find the one fact that would change the deal. In this sub-sector the finding to look for first is a mismatch between what the business says it does and what its licence, vehicles and people allow, or a contract that cannot be assigned. This guide lists the documents and searches that surface those findings, and what each finding means for the deal.

Prove the tier against the paperwork

Collect the company’s certificate or licence, its vehicle list, and the crew certifications, and set them beside the service description in the contracts. In Ontario, the Ambulance Act defines an ambulance by the people carried and bars operating an ambulance service without a certificate. It also lets inspectors enter a workplace where an ambulance, vehicle, supplies or equipment are located and examine records and equipment to check compliance. A gap here can be a deal-breaking finding, since it can mean the company is not entitled to the work it is doing. Treat it as a reason to renegotiate, restructure or stop, and have counsel advise.

Get contract assignment answered in writing

Read each health-authority and hospital contract for consent, assignment, change-of-control, termination and re-tender language, then confirm the counterparty’s position through the seller and your lawyer. If the counterparty will not assign, or treats the sale as a trigger for a new tender, the revenue you priced may not come with the business. Make counterparty consent a closing condition, or adjust the price to reflect the risk.

Search the fleet for liens

Vehicles are tangible assets that may carry security, so ask the seller who holds security over them. Under Ontario’s Personal Property Security Act, a search can be run against the individual debtor name index, the business debtor name index or the motor vehicle identification number index, and the registrar issues a certificate stating whether a financing statement or financing change statement is registered against the name or number, and whether a Repair and Storage Liens Act claim for lien is registered against it. Ontario’s Access Now service gives online access to the province’s personal property security registration system, including lien searches. Run the search on the company’s name and on every vehicle identification number, and require discharges for anything the seller has not disclosed. Other provinces run their own registries.

Test the people and the records

Match the attendant roster against certification records and expiry dates, and compare it with the staffing each contract requires. A shortfall that already leaves trips unfilled is a finding on its own, since it may breach the contract. On records, Ontario’s Personal Health Information Protection Act allows a custodian to disclose personal health information to a potential successor to assess and evaluate the custodian’s operations if the potential successor first enters into an agreement with the custodian to keep it confidential and secure and not to retain it longer than necessary for the assessment. Confirm that the seller is working under such an agreement before you see patient-level files.

• Certificate or licence, with the conditions attached and its expiry date
• Every health-authority and hospital contract, with written consent status
• PPSA lien search results for the company name and each vehicle identification number
• Attendant certification list with expiry dates, and the contract staffing requirement
• Incident, complaint and inspection history from the regulator and the contract counterparties

Ask the regulator and the counterparties yourself

A seller’s binder is the seller’s account. Where the seller agrees, ask the regulator for the company’s standing and ask each contract counterparty whether it has raised service concerns, issued notices or planned a new tender. Ontario’s Ambulance Act lets the Director appoint inspectors and investigators, so ask for any inspection reports and any orders the company has received. Ask the insurer for the loss history in writing, and ask the seller about any complaint or incident that has not been written down. Gaps between these answers and the binder are findings in themselves.

Decide what each finding means

Not every finding need end a deal. Ask your lawyer whether an undisclosed lien could be discharged at closing from the sale proceeds, or an expiring certification covered by a covenant to renew. A contract that cannot be assigned, or a tier mismatch, goes to the root of what is being bought. Write the finding, its consequence and its remedy into the purchase agreement, and let your lawyer decide whether it belongs in a condition, a representation or an adjustment to price. The financing guide explains how the same findings bear on a loan.