When buying or selling a pharmacy, one critical aspect that can make or break the deal is the due diligence (often referred to as ‘DD’) and disclosure bundle.

A buyer will likely provide you with a comprehensive questionnaire at the outset of the transaction, covering all areas of the business including financial, operational, property and compliance matters. You will be asked to complete this questionnaire, which will typically form the basis on which the due diligence and disclosure bundle is created.

This bundle is a comprehensive collection of supporting documents that provide transparency about the pharmacy’s operations, financial status, and legal obligations.

Properly preparing a DD bundle is vital for minimising future disputes and ensuring a smooth transaction process.

We have set out some key areas of the bundle and why each part is important.

1. Financial statements and records

These documents offer vital insights into the pharmacy’s financial health and performance, allowing potential buyers to assess the business’s viability and value.

To give a clear picture, you should include comprehensive financial statements from the last three years.

This includes balance sheets, income statements, cash flow statements and NHS statements (FP34s).

If the statements are outdated, recent management accounts may suffice.

Additionally, include copies of tax returns for the past three years to offer a complete financial overview.

2. Contracts and agreements

Contracts and agreements outline the obligations and rights of the pharmacy in various business relationships.

They help buyers understand existing commitments and evaluate any potential liabilities or benefits.

Documents you will need to include are:

• Lease agreements – Copies of property leases or tenancy agreements.
• Supplier contracts – Agreements with suppliers and service providers.
• Pharmacy management agreements – If applicable, agreements related to the management of the pharmacy.

3. Regulatory and compliance documents

Regulatory and compliance documents are crucial to show that the pharmacy adheres to all necessary regulations.

These documents provide evidence that the pharmacy meets data protection and health and safety standards, as well as medicinal and pharmaceutical regulations.

Include pharmacy licences, registration certificates, and any other relevant regulatory approvals.

4. Employee information

When it comes to employee information, transparency is key. Buyers need a clear understanding of the workforce to assess potential operational impacts.

You should provide a comprehensive list of all current employees, including their roles, hours of work, salaries, and employment status.

Include detailed contracts for all staff members and information about employee pension schemes and other benefits to give a complete picture of the human resources landscape.

If you engage locums, provide full details of these arrangements, including how often they are used and rates of pay.

5. Insurance policy documents

Insurance policies protect against various risks and liabilities. These documents outline the coverage in place and any outstanding claims that could affect the business after the sale.

You should include copies of all active insurance policies and certificates, such as liability, property, and professional indemnity insurance.

Additionally, provide information on any past insurance claims to give buyers a thorough understanding of the risks and protections involved.

6. Legal disputes

Legal disputes are also a significant aspect to address. This is because buyers need to be aware of any potential, ongoing or past legal issues to assess actual and potential risks associated with the pharmacy.

Full disclosure of these matters helps in evaluating the possible impact on the transaction and avoiding unexpected complications.

7. Inventory and asset information

Accurate inventory and asset information are vital for assessing the value of tangible assets and stock.

The most recent stock take certificate will give a good indication of stock levels.

A detailed inventory list should be included and will outline all material assets of the business.

Including asset valuations will help buyers negotiate terms and evaluate the overall value of the business.

8. Disclosure letter

One of the most essential elements of your due diligence and disclosure process is the disclosure letter.

This formal document acts as a declaration of known issues and exceptions and qualifies the purchase agreement. These disclosures put a buyer on notice of these issues and help manage expectations and reduce the risk of claims arising from undisclosed problems.

The disclosure letter should clearly identify all relevant facts and issues affecting the pharmacy that may not be immediately clear from the documents provided.

Conclusion

A comprehensively prepared disclosure bundle is essential for a smooth pharmacy transaction.

It not only ensures transparency but also protects against potential future claims.

By including all relevant documents and information, it makes the transaction process smoother and more efficient.

If you need expert guidance in preparing your disclosure bundle or navigating the complexities of a pharmacy transaction, Ansons Solicitors is here to help.

Our pharmacy team has a national reputation in buying, selling, or refinancing pharmacies and have advised on over 35 transactions in the last twelve months alone.

Our team manages all aspects of the transaction including the disclosure, from drafting and negotiating the disclosure letter to preparing the due diligence and disclosure bundle.

For a consultation or to learn more about how we can help with your pharmacy transaction, contact Ansons Solicitors today.