NDIS acquisitions in distress: Four critical considerations

The NDIS sector is experiencing a wave of consolidation, with an uptick in transactions reflecting both opportunity and urgency. From regional mergers to national expansions, the common thread is distress.  There has been a significant erosion in financial sustainability for NDIS providers over the past few years but the ‘straw that broke the camel’s back’ would be the recent NDIS price guide changes and/or the recent re-scoping of the old Disability Employment Services program now badged as the Inclusive Employment Australia program.

Providers considering exiting or acquiring should think about the following issues:

1. For Providers in Trouble: Call It Early

In our experience, and regrettably, too many providers wait until the crisis is irreversible, placing participants, staff and service continuity at real risk (not to mention the personal liability and reputation of their directors).  Early action creates options: strategic partnerships, managed wind-downs, restructuring options or supported transitions.

Recommendation:

• Monitor financial and compliance indicators closely.
• Engage with funders and advisors early.
• Consider pre-emptive restructuring or merger discussions (either within or outside of a formal voluntary administration) before liquidation becomes the only path.
• Prioritise participant safety and service continuity in all decision-making and communications.
• For directors, don’t put your credibility and personal liability at risk, make the call early.  If you are looking for a provider to ‘rescue’ the service, be realistic and up-front about this in order to ensure a speedy transaction (leave egos at the door).

2. Structuring the Deal:

Share sales, NFP takeovers and asset sales are all viable pathways in distressed transactions. NFP takeovers and share sales can offer speed and continuity in some circumstances (preserving NDIS registrations, staff, and participant relationships). Asset sales, on the other hand, may provide cleaner separation and more defined liability boundaries.

Recommendation: Choose the structure that best suits the risk profile, urgency and strategic objectives goals of the transaction. Ensure legal, operational and financial teams (external if necessary) are aligned early to manage implications for funding, compliance, and continuity.

3. Participant Consent and Continuity

NDIS participants do not automatically transfer in a business sale. Even in share sales or NFP takeovers, participants can opt out. Buyers must manage leakage risk and ensure genuine informed consent in line with the NDIS Code of Conduct and Practice Standards.

Recommendation:

• Be careful to ensure that communications and documentation comply with the NDIS Code of Conduct and Practice Standards.
• Build participant transition protocols early including communication plans, consent documentation, and service continuity guarantees.

4. Acquiring Providers in Administration

Where a provider is in administration, buyers must navigate additional complexity and in very tight timeframes.  This brings with it both risk and opportunity.

Recommendation:

• Seek specialist advice from legal and financial consultants experienced and networked in both insolvency and NDIS.
• Engage early with administrators and key stakeholders.
• Consider whether a deed of company arrangement (DOCA) is advantageous.

For assistance, please contact Amber Crosthwaite at 0400 143 677 or amber.crosthwaite@lavan.com.au.

Disclaimer

The information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.