FINANCE ARE YOU READY TO OWN A PHARMACY?
WITH THE PHARMACY SALES MARKET REMAINING BUOYANT AND THE BANKS MAINTAINING A HEALTHY APPETITE TO LEND TO PHARMACISTS, 2018 IS PROVING TO BE A GOOD YEAR SO FAR FOR TRANSACTIONS.
A recent report by Christie & Co noted that sales activity in the first quarter of 2018 was up by 31% and enquiries from those looking to buy were up by 18% compared to the same period last year.
Here are some questions and pointers if you are considering a purchase:
Why are you buying? Seems like a straightforward question but you will probably be surprised to hear that a good number of people who begin the process do not actually end up buying. You should set yourself clear objectives as this will provide you with the motivation to get over the hurdles that will come your way throughout the process.
Are you financially ready? The initial
purchase is a significant investment alongside the first year running costs and any refits or upgrades to fixtures and fittings you wish to make. Determine your budget early and what cash you will need for working capital and renovations. Knowledge of your own resources from your Accounts and what might be available from a lender will be key to purchase negotiations and paying the right price for the pharmacy. If a property is included in the assets being acquired, then get a surveyor involved too.
What type of pharmacy are looking to buy? Think about the size and location of the pharmacy. Are you looking to manage the pharmacy yourself or employ people to manage and run it for you? What level of return do you require? It’s best to decide on these factors early as it will ensure that you don’t waste time on looking at potential purchases that don’t meet your requirements. You will also need to examine the thoroughness of the vendor’s valuation model and the credentials of the preparer.
Get up to speed on the potential hurdles you will face. A lot of this depends on whether the pharmacy- owning company and its share capital is for sale or whether an asset sale is taking place. The latter may include the premises, NHS contract, goodwill and stock. There are pros and cons to both routes, not least in terms of tax and price, and it is vital that these are clarified as early as possible.
Warranties and indemnities are a typical feature of Sale & Purchase Agreements (SPAs) for pharmacies. A warranty may be included stating that there have been no claims against the business. An indemnity clause often included in SPAs might state that the seller must bear any costs incurred by unresolved litigation against the pharmacy business after completion. Your solicitor will seek clarity on both so there are no nasty surprises later on.
If you are ready to buy or sell, get in touch and I’ll talk you through the process so that you are fully aware of what’s involved, the time it could take and the costs. •
MARK TENBY DIRECTOR, MARTIN AITKEN & CO E:
MLT@MACO.CO.UK T: 01412720000
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