Making the decision to sell your pharmacy can understandably be a daunting and emotional prospect, particularly if you have spent many years growing your business and building your reputation.  The process of selling your pharmacy can involve a lot of time and hard work, so you will need a trusted team of advisors who understand the pharmacy sector, on your side.

Kim Strachan, Solicitor in the Corporate and Commercial Team here at Ansons, outlines some tips on preparing your pharmacy for sale to help maximise value and ensure a smooth sale process.

Advance preparation and planning

Assemble a team of trusted advisers early on, ideally with pharmacy sector specialist knowledge, so that you can plan your exit strategy on a financial, tax and legal level.  Your accountant will be able to advise you on the most tax effective structure for the deal.

Check whether you are making the most out of your business.  Take time to review what services you offer and what more, if anything, can be done to increase revenue or streamline costs, which will help you maximise value.

Get your “house in order”

Finally, do what you can to get your “house in order” ahead of the due diligence process.  Are you likely to have easily to hand everything a Buyer is likely to want to see?  Are there any areas of the business which are a concern from a compliance perspective and which may need looking at ahead of any sale?   Ansons regularly advise clients on what to expect during the sale process and how they can make life easier by good preparation ahead of any sale process.  A legal pre-sale Ansons health check for a relatively small fee (by comparison to deal costs) can be useful at this time.

Due Diligence

The sale process will almost inevitably involve the Buyer looking into every aspect of your business.  This is called ‘Due Diligence’ which is primarily broken down into two separate parts; financial and legal.  The financial due diligence will be carried out by the accountants and will involve reviewing the accounts, management accounts and tax affairs of the business, looking at compliance aspects as well as profitability.  They will want to make sure that the price being paid is justified.

The legal due diligence will look into most areas of the business including your contracts, employees, insurance and more!  It can be time consuming but an open and honest approach is always the best policy.  This is where your previous preparation in “getting your house in order” should really pay dividends.

Some key issues we have seen in previous transactions include:

• Insurances – Your policies may be up to date and fully paid up, but are your policies in the correct name? We have seen Pharmacy businesses that have previously incorporated with limited company status where the insurances have been kept in the sole trader’s name.
• Company Registers – Often called your statutory books but not only is it a legal requirement under the Companies Act 2006 to maintain these; they are also definitive proof of who legally owns the shares. Having up to date company registers instantly helps create a positive impression to a prospective buyer.  If unsure, consult with your Solicitor about this.
• Contracts – Do you know the basis on which you are contracting? Do you have full contractual information (not just invoices) evidencing the terms of your contracts with, for example, your suppliers?  Do you own your PMR system or is it leased?  Do you need any consent if contracts need to be assigned or can any contracting party terminate a contract with you if the business changes hands?  This will be of core importance to a prospective buyer.
• Is the business registered with the Information Commissioner’s Office at www.ico.org.uk? Failure to comply with the data protection legislation could result in prosecution and could even include a significant fine.
• Are your contracts of employment and employee policies and procedures up to date? To the extent possible, check that properly executed and enforceable employment contracts are in place with your employees. Prospective buyers are often keen to retain employees who are well known by patients and customers, as this contributes to the business’s goodwill and will be a key aspect of any buyer’s due diligence.
• Is the pharmacy NHS contract in the correct name? If you are proposing to sell the shares of your company it is worth checking that the NHS contract is already in the name of the company. If not, you will need to apply for a change of ownership of the contract which can then delay a sale by months.
• Consider the impact of Covid-19. For buyers it will be particularly important to raise Covid-19 related enquiries covering matters from finance to compliance.  Buyers are likely to require details of any Covid-19 outbreaks, how they were handled, any use of the furlough scheme and details of any financial assistance received as a result of the pandemic.  Collating this information in advance will be good preparation.  In addition, with the Government clawing back the full £370m of Covid-19 Advance Funding Payment from October 2021, how will this impact on your deal?  Have you treated these payments properly from an accounting perspective?

Targeting your market

At the right time, it is useful to instruct a specialist broker who is experienced in the pharmacy sector and can not only advise you on the value of your business but find you the right buyer.  Experienced brokers will know the market well and should be able to optimise sale value for you as well as sound out some potential buyers on a confidential basis, if you prefer this approach.  We have a network of trusted brokers who we regularly work with in this sector and so can make introductions.  You want to know that your buyer is serious and capable of doing the deal and a broker will be able to narrow down the field for you to avoid you wasting your time on endless “tyre kickers”.

Positive approach

Selling your business is likely to be one of the biggest transactions you will ever be involved in and it can exhaust your time and energy.  Recognising this early, adopting a positive mind-set and planning your strategy with your advisory team will help you avoid a drawn-out process and related deal fatigue.

The Pharmacy Team here at Ansons is made up of specialist corporate and commercial property lawyers who have extensive experience and specialist expertise in pharmacy sales and purchases, with an established history of servicing the legal needs of owner managed pharmacy businesses both large and small across the UK.

For more information on buying or selling a pharmacy, refinancing or relocating a pharmacy, renewing your lease or preparing your business for sale, contact Kim Strachan on 01543 431 921 or email kstrachan@ansonsolicitors.com

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