Blog

by Daniel Jones

Brief context: GP practice mergers are becoming increasingly common due to pressures on NHS resources and workforce challenges. While mergers offer many benefits, they can fail to deliver if key legal, operational, and cultural risks are not managed early on.

Pitfall 1: No Updated Partnership Agreement Post-Merger

When GP practices merge, it is not uncommon for the Partners to continue under an old partnership agreement, or to not put on in place at all – which can create a legal vacuum for the governance and running of the new practice. This can lead to serious issues within a newly merged practice as legal clarity is essential to ensure stability following a merger.

How can this situation be avoided?
The best way to avoid this is to have a specific Partnership Agreement drafted prior to completion of the merger as to ensure that the various aspects of practice governance (i.e. finances, property, duties, obligations, etc) are agreed upon prior to the merger. This avoids the above-mentioned legal clarity and stability issues as the merger Partnership Agreement, which will be binding on all Partners, will clarify any uncertainty that arises.

Pitfall 2: Failure to Align on Financial Commitments and Liabilities (Due Diligence)

A GP practice merger combines the two sets of financial obligations of each original practice. Following a merger (subject to indemnities and the merger partnership agreement), these blended financial obligations become the collective responsibility of all partners. This means the merged partners may end up inheriting unexpected or unequal financial burdens.

How can this situation be avoided?
The best way to avoid this is to conduct thorough financial due diligence before signing any Business Transfer Agreement (BTA). This would involve reviewing accounts, tax liabilities, supplier contracts, any ongoing litigation, and any partnership loans (to name some examples). Following due diligence, it is the advisable to agree on and document how these financial liabilities will be shared in the BTA and merger partnership agreement.

Pitfall 3: Premises Ownership and/or Lease Arrangements (property ownership arrangements)

GP Practice mergers often result in the merged partnership operating out of a mix of freehold (owned) and leasehold premises. Without clear premises arrangements in place, disputes can arise over how the premises (and the associated costs and profits linked to the premises) are treated.

How can this situation be avoided?
The best way to avoid this is to agree on how ownership of freehold premises and how the costs of the leasehold premises are dealt with in advance of the merger – likely during the due diligence stage. Following this, it is important to set out these agreed upon premises arrangements in a binding document, like the merger Partnership Agreement or a Declaration of Trust, to ensure that whatever is agreed can be enforced.

Pitfall 4: Ignoring Staff Integration and TUPE Compliance (Regulatory compliance)

When GP Practices merge, staff from the merging practices will automatically transfer to the new merged partnership under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as ‘TUPE’). Failing to comply with and properly manage these obligations can trigger the potential for costly employment claims against the practice.

How can this situation be avoided?
The best way to avoid this is to ensure that all employment contracts are audited prior to the merger. Once the TUPE transfers are known, it is then advisable to plan staff integration carefully. Having a well thought out plan is vital as any attempt to change employment contracts or harmonise terms for “business efficiency” without proper grounds can lead to claims and employee dissatisfaction.

Pitfall 5: Clinical and Administrative Governance Structure synergy (governance consensus)

Even once the financial and legal matters are agreed upon, many mergers run into issues with governance and the running of the new merged practice. This can be due to differences in clinical protocols, IT systems, management styles, and/or general procedure. If these differences are not addressed, they can lead to confusion and potentially even disputes.

How can this situation be avoided?
The best way to avoid this is agree on a unified governance and management framework prior to merging as to ensure that there are no disagreements on how the new practice should be run going into the merger. This unified governance and management framework can then be put into the merger Partnership Agreement as to ensure that it is binding on the Partners.

Conclusion:

GP practice mergers can bring real benefits to your business, but they also carry significant risks if not managed properly. Many of the problems that arise after a merger come from issues that could have been addressed beforehand with the right planning and documentation. Taking the time to deal with these matters early on will help avoid disputes and uncertainty, and give the new partnership the stability it needs to move forward.

Contact us today

If your practice is considering a merger, our specialist healthcare lawyers can guide you through every stage, from due diligence to drafting a robust merger agreement. Get in touch with our team today to discuss how we can assist with your practice merger.