Guide to buying a golf course

Thu, 28 Apr 2011

Golfing continues to be one of the most popular leisure pastimes in this country. In the 1980s there was a significant surge in interest in the sport. One industry body claimed that the UK needed 500 more golf courses to satisfy golfing demands. There were even tales of determined golfers sleeping in their cars overnight outside clubhouses to secure a place early the next day.

From 2006 through to 2009 many golf clubs had a much shorter waiting list for prospective members. A sports marketing survey conducted in 2009 reported that there were roughly 2,800 golf courses in the UK with five million people playing at least once a year. And by early 2010 it was reported that player numbers were recovering after the recessionary dip.

Now that we are moving out of the economic trough and returning to growth, potential golf course buyers can expect that demand will be on the rise as people become more relaxed about spending cash on pleasure pursuits once more.

Now is, therefore, an opportune time to buy a golf course. Important factors to consider when making your purchase are outlined here.

There are two main methods of purchasing a golf course. Buying the assets and goodwill is considered to be the easier route. The liabilities of the current business are not inherited, the due diligence process is faster and the purchase agreement is much smaller. You can expect to pay stamp duty though, which could be up to 5 per cent of the asking price.

Purchasing the existing company through its shares is the other option. This route involves taking on its known liabilities and those which may surface later on, potentially after the sale has been completed. The due diligence process will be a lengthy one and the purchase agreement will have several warranties and indemnities the owners will have to give. Stamp duty on the shares will be substantially less at around ½%.

Property type
The buyer may like to consider what type of property they would prefer to acquire – leasehold or freehold.

Taking on a freehold is considered to be easier. Buying a leasehold property requires careful examination of the lease before committing to the sale. When does the lease expire? What are the details of the user clause (how can the site be run etc,)? What are the rental costs and how is the rent reviewed?

Freehold or leasehold, it is a good idea to check that all parts of the business are operated in-house. If parts of it are leased out, is it possible to get them back?

Location
The location of the golf course is very important. If it is not traded as a destination resort, the accessibility and local population will be crucial factors. Ideally, customers are able to reach the site in 20 minutes drive time. Consider any likely seasonal highs and lows, and what method of running the golf course would be most suitable for the local market e.g. members’ only club or pay and play, high end of the market or cheap at the other end.

Finances
It will be necessary to grasp the financial performance of the business, its trade history and future potential. Be sure to examine copies of the past three years’ worth of audited accounts and current management accounts. Compare this information with available benchmarking data on golf courses to get an understanding of its performance. If any weaknesses are found, these can be discussed with the seller, along with potential for future growth.

Due diligence
A due diligence process should assess the following areas: planning, course condition, environmental issues, licences (for the sale of alcohol for example), health and safety compliance, and any employment related issues and/or legal disputes.

As the pace of new technology infiltrating the market quickens, golf course owners should be aware that they will have to decide whether to keep up-to-date with changes, and so compete with rival courses.

On a more positive note golfing is now attracting a broader client base, with numbers of women golfers rising. Out of the five million players estimated in 2009, 750,000 were women.


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