In the current economic climate, can anyone buy or sell a pharmacy with confidence?
According to the Ansons corporate and commercial team, which has completed over 40 pharmacy transactions in the last 12 months, there are plenty of opportunities in the marketplace.
Following some research amongst Ansons’ pharmacy clients to identify the most pressing current issues, one client summed up the concerns of many with the comment ‘cash flow, cash flow, and cash flow!’
Solicitor Jamie Gill examines some of the most common concerns that pharmacy owners are facing today when considering a sale of their business.
Category M clawbacks
In the latter half of 2012, we saw the value of category M clawbacks jump quite significantly.
As the clawback is an adjustment based on historical figures, where does the buyer of a pharmacy stand when hit by a clawback based on sales of the former owner of the business?
Whilst a seller may want to dispose of any liabilities of its pharmacy, it would not necessarily be reasonable for the seller to reap the rewards of its sales and pass on any clawback in relation to those sales on to the new owner. A reimbursement may therefore be necessary from the outgoing pharmacist.
New GPhC Standards
We are currently in a state of a transition with regards to the new GPhC standards, which extend to governance, service delivery, premises, equipment, facilities and staff.
The standards do not come into force until October this year, at the earliest, but should be a consideration for anybody looking to buy, or sell, a pharmacy in the near future.
If you purchase a pharmacy and find out that the pharmacy does not meet the new standards, where do you stand? If you are planning to sell a pharmacy, is it worth ensuring your pharmacy is fully compliant with the new standards before advertising for sale?
The Ansons specialist pharmacy law team can prevent any surprises by carrying out tailored due diligence. This will identify whether the pharmacy is compliant in all areas, including the new GPhC standards.
As well as taking preventative measures, we would also seek to implement a corresponding ‘cure’ by way of certain protections and assurances from the outgoing seller to give you piece of mind in your new venture.
Surplus cash in the business – always a good thing?
Pharmacy owners often have surplus cash at the bank when selling and will want the most cost and tax efficient method of extracting that cash. A buyer will want to avoid just buying the money in the company, requiring them to find extra money up front and putting extra strain on resources where they may already be seeking assistance from the banks.
However, when a buyer pays for the cash in a company, this can be a more tax- efficient way for a seller to extract their cash from a company as they may profit from tax benefits such as entrepreneurs’ relief. Where the cash is substantial this could cause problems for a purchaser.
More than one pharmacy?
Anyone with a chain of pharmacies to sell will need to consider the structure of their company before sale – something which is often dictated by the market. It may become necessary to sell to more than one buyer, which would require restructuring the assets of the business to enable the sale of separate pharmacies to take place, and can often be tax driven. We know it is important to manage the structure and timing carefully, as one sale can often be dependent on another.
These are just some of the issues that pharmacy owners are currently facing when trying to buy or sell a pharmacy and our specialist pharmacy team is able to provide you with pragmatic and straightforward advice to enable you to make the right decision.
The Ansons corporate and commercial team is experienced in guiding our clients through these potential pitfalls to ensure that they can buy or sell their business with confidence. In particular, we advise our clients in order to get the most cost-efficient and tax-effective sale or purchase.
For further information, contact Jamie Gill on 01543 466660 or email email@example.com.