Buying a pharmacy needn’t be a headache — providing you stick to a few simple rules, says legal expert Richard Life
The Government’s cuts to community pharmacy funding in England and Brexit’s impact have been undeniable. Such uncertainty has led to a large number of independent pharmacies showing a renewed interest in selling their business.
Whether you want to acquire your first pharmacy or you’re already progressing along the acquisition trail, you need to be confident that your deal completely stacks up. This is a major commitment and investment, so it is crucial that you are fully prepared and informed for the process ahead.
We’ve helped many buyers secure the right deal for them. Here is some advice for those who are thinking about buying a pharmacy:
1 Choose your advisers early on and involve them from the start
Waiting to engage with advisers until the last minute is almost always a big mistake: you will find yourself on the back foot heading into negotiations with your advisers playing catch-up. Engaging your advisers at the earliest stage possible will give them optimum time to understand your business plans and ambitions.
They can then prevent you from pursuing dead-ends and, ultimately, can increase your chances of structuring your transaction to protect your interests. This is also true of funders. If you require funding as part of any transaction, engage early with your existing lender, broker or other finance provider to understand what they will lend you and their lending criteria, so you can factor this in to your timetable.
2 Be thorough during the offer stage
Once your offer has been accepted, it is crucial that you enter into heads of terms with the seller(s) that set out the basis of your offer, including any assumptions or conditions, or both, attached to it. You also need to ensure that you have a period of exclusivity to investigate the business (due diligence) and negotiate the terms of purchase with time to finalise them.
3 Look into the future as far as possible and plan for what it potentially holds
If you are buying a business, it’s important to plan ahead for the next three, five or even 10 years. It is always good to have a business plan that considers as many external factors as possible. While there are no guarantees, considering all possibilities is not just an important part of planning but will also likely impact on the price you should be paying for the business. So it pays in more ways than one to plan ahead.
4 Get the right tax advice
While this may seem obvious, it’s surprising how often it is overlooked. Again, if you engage early with an adviser they can
inform you about any possible tax-efficient ways of structuring your transaction (for example, a business and assets or a share transaction) and mitigating any potential tax liabilities.
5 Due diligence
As consumers, we expect a certain level of protection: if you buy an item from a shop or online and it doesn’t work as advertised, you have certain rights. If you acquire a business, however, it’s a case of buyer beware.
It is, therefore, important to undertake due diligence (typically in legal and financial matters) to understand what you are acquiring, what isn’t part of the business and is, therefore, excluded from any transaction, and whether or not there are any liabilities or potential issues relating to the business that you need to factor in and mitigate.
Richard Life is a partner at HRC Law