Plain selling

In the second part of Richard Hough’s examination of the issues commonly encountered during pharmacy transactions, he focuses on the sales process.

Pharmacy sales are frequently prompted by the retirement of the business owner, a desire to relieve the pressures of running a pharmacy on a daily basis, and dare I say it, deep-seated concerns over falling profitability and goodwill values. If you are looking to exit from running your business and want to sell at the earliest opportunity, these helpful pointers should hopefully highlight some prior considerations around the transaction with a view to making the sale process as smooth and efficient as possible.

1. Have the pharmacy professionally valued

To make sure you are getting the best price you can, it is strongly advised that you have your pharmacy valued by a professional and objective advisor, who has a good understanding of the current national data for the sector. Ideally, you need the pharmacy to be valued by an accountant with experience in the sector.

Also, you need to make sure that you are optimising the pharmacy value, which can be achieved by focussing pre-sale on maximising revenue from any advanced and enhanced services that are offered by the pharmacy. You want to sell the pharmacy for the best possible price, and an up-to- date valuation will help you decide whether selling at this time is the right decision to make.

2.Recruit your specialist advisory team

Ensure you have a specialist and experienced team of professional advisors to support and assist you through the process. As with the professional valuation, ideally you want advisors with specialist knowledge of the pharmacy sector.

You will need an accountant / financial advisor who can advise you on the most tax-efficient deal structure whilst considering your financial future.

You will also need a solicitor who has the expertise to guide you through the legal process as proficiently as possible. Unfortunately, we see time and time again that some professional advisors do not have either the requisite experience or resource to be able to manage the transaction efficiently. This inevitably and very quickly leads to delays and frustration on both sides.

3.Be prepared and organise your books

When you are immersed in the day to day operation of a pharmacy, we appreciate that hunting down and obtaining large quantities of documents for your solicitors may not be at the top of your list of priorities, but you will need to make an effort to do so when selling your pharmacy if you want the sale to go through as quickly and efficiently as possible.

The main reason for being prepared is to avoid delays during the transaction process. However, being prepared and having the documents available in an orderly fashion and in good time also instils confidence

in your prospective buyer, who can all too often can get jittery. It also shows that the seller is committed to the transaction and is organised, reassuring the buyer that there may be less likelihood of nasty surprises. Many of the issues that can frequently cause transactional delays can be considered and dealt with in advance by an organised seller.

The buyer carries out due diligence during the transaction process to investigate each area of the business, making enquiries on aspects that are unclear or haven’t been initially disclosed. Therefore, if you are able to provide any and all information / documentation at the outset, this can reduce the amount of time spent during the due diligence exercise, which is typically the most time consuming stage of the transaction.

Examples of information / documentation that sellers can prepare and review in advance are:

  • Full copies of supply contracts
  • Employee contracts, insurance and up-to-date employment policies
  • Pension details (ensuring all obligations are being met)
  • Insurance contracts
  • All licences and permits
  • Leases and hire agreements
  • Asbestos reports
  • Energy performance certificates
  • Fire risk assessments
  • Evidence of registration with Information Commissioner’s Office (as failure to comply with data protection legislation can result in prosecution and sometimes a sizeable fine).

When preparing the information / documentation for the buyer, some frequently recurring issues to look out for are:

  • incorrect names on leases and contracts
  • locums being deemed as employees due to regular working patterns
  • the incorrect name of a proprietor being included in the NHS pharmaceutical list.

Your accountant will also need to consider the financial due diligence. Therefore, you and your accountant must ensure that all your records are up to date and in order. Usually the buyer requires at least 3 years’ worth of financial information from the seller.

Selling your pharmacy doesn’t have to be hard work and time consuming. To avoid frustration and delays, you should deal with issues and challenges as positively and expeditiously as possible – thought it’s often easier said than done.

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