This site is intended for Healthcare Professionals only

Preparing to sell your pharmacy

Finance

Preparing to sell your pharmacy

Selling your pharmacy requires effective planning. Vinku Shah explores what you can do to get the right offer and ensure the process is smooth… 

As an independent pharmacy owner, you will have an attachment to the business you have created because of the difference it has made to people’s lives over the years, inspired by the team who helped you get there.

You will have surely thought about selling for some time before you decide to market the business. Sometimes, a sale could also be triggered due to an unexpected change in circumstances.

Valuation

Before marketing the business, you should meet with a pharmacy specialist accountant and obtain a valuation of the business. This is important as most likely you will have a price in mind, and it could be too high.

If the price is too low, then potential buyers may think there is something fundamentally wrong with the business. Therefore, seeking a valuation will help manage expectations early on as well as ensure that your business is marketed at the right price.

Financial information

You should make sure that your business financials are organised, and accurate, as more precise information instils confidence in potential buyers.

We would recommend appointing a pharmacy specialist accountant at least three years prior to your intention to sell as they will be familiar with the requirements of a financial and tax due diligence and will be able to help ensure your financials are accurate, and that information or explanations requested by the potential buyers are readily available.  

The buyer’s advisers will scrutinise at least three years’ accounts and related supporting financial information and if there are any inconsistencies or fundamental issues, they could use these to negotiate the agreed price downwards.

Lease

If the premises from which the business operates is leased, you should ensure that you are up to date with the lease payments and that you have a good relationship with the landlords.

Potential buyers would usually require a minimum 15-year lease in line with lender requirements. If the landlord refuses to grant a new lease, then the deal could collapse at a late stage with costs already incurred by both parties to the transaction.

Employment contracts

You must ensure that all employment contracts are up to date and available on file. The contracts should offer clarity to the buyers in terms of pay rates, notice periods, holiday entitlement incentives, etc.

At the same time, it is important that all staff records e.g., sick leave, holiday days outstanding, etc. are up to date and regularly agreed with the respective staff to prevent disputes later.

Review of contracts

Contracts for supply of goods and services must be reviewed and up to date. Supplier terms and conditions, customer and any other legal contracts should be reviewed for any potential issues that may arise and jeopardise the sale and resolved prior to marketing the business.

Often, we find contracts have not been reviewed for a long time or new terms negotiated as the contracts have past their expiry date and this delays the transaction adding to the legal and professional costs. 

Business continuity

Your staff are one of the major reasons for the success of your business and a potential buyer will be interested in knowing whether the business can operate without you i.e, it does not solely rely on you.

It is therefore important to continuously develop your team through training initiatives and also to incentivise them. A business that can operate successfully without you would generate more interest from potential buyers.

Operational processes

If you have been running your business for a long time, there is high chance that some of the systems and processes may be outdated.

It is important to review and streamline your systems and processes to ensure that the business is operating efficiently. These will bode well with potential buyers.

Professional advisers

As mentioned previously, it is important to appoint pharmacy specialist accountant at least three years prior to marketing your business for sale.

It is equally important to appoint a legal team with specialism in the community pharmacy sector as your advisers will work together to ensure the transaction runs smoothly to completion.

This will also be dependent on the due diligence not turning up any potential issues that could have been addressed prior to marketing the business.

Identify your objectives

It is important to address what your objective for the sale is. It could be that you are retiring and want to ensure the business is sold to the right buyer to continue your legacy or you want to achieve a certain price based on the valuation and discussion with your accountant. 

Marketing the business

Once you have the right team of professionals to support you and know your objectives, you will need to market your business.

You may have spoken to your team of your intention to sell, and they could be interested to buy the business in which case you will not require to list the business for sale.

If you do need to list the business for sale, you should approach at least three pharmacy business selling agents. The agents will ask for various information and advise you on strategies to make your business more attractive to potential buyers as well as a guide price.

You will already have some of the information if you follow through with the points highlighted above. For example, you will already have a valuation from your specialist accountant. It is important to choose an agent who demonstrates knowledge of your business, current trends and is able to address any concerns efficiently.

Prepare for viewings

Once the business is marketed, you may need to rearrange your business display to impress potential buyers as first impressions are always important. A clean and tidy business with good lighting will be create more interest from the agent’s online website. 

Poor preparation will lead to unnecessary effort and increased legal and professional costs and ultimately jeopardise the sale of your business. 

With all pharmacy business sales, it is important to be prepared well in advance and make use of specialist advisers that can help you achieve your objectives.

Vinku Shah FCCA is a chartered certified accountant and partner at Silver Levene LLP. He can be contacted on 020 7383 3200 or vinku.shah@silverlevene.co.uk

Copy Link copy link button

Finance

Share:

Change privacy settings