How To Sell A Pharmacy
For many reasons such as retirement funding or changing business direction, it might be a good idea to sell your pharmacy.
The medical market has witnessed some meteoric changes over the last few years. As the Coronavirus pandemic hit, the global economy was forever altered - but for those working in the medical technology sector, there has also been lots of great opportunities to buy or sell pharmacies
Companies such as Pfizer, who developed an effective Covid-19 vaccine, saw their stock prices soar. The medical market, in general, has been extremely busy - with many new opportunities and businesses founded during this period. If you own a pharmacy and you're looking to sell, there's never been a better time thanks to market buoyancy and strong demand.
However, approaching your sale requires equipping yourself with all the knowledge possible to make sure you get the best possible value out of the process. Selling a pharmacy is an exciting but sometimes challenging journey. At Rangewell, we can act as your selling agent and help cut down on the complexities associated with finding buyers, screening for finance decisions and even forging agreements.
So, in order to protect the goodwill you've built in your community and identify the best price to suit your expectations, work with us and we'll help you navigate the sales process. We're a reliable partner who can also help your buyer secure finance so they can meet your asking price, or negotiate an alternative to ensure the sale goes through.
However, before you get in touch, get equipped with all the knowledge you need in this guide. We'll walk you through the selling process in this article, but you can also get in touch direct at any time to see how our selling agent can assist in your sale.
Reasons for selling your pharmacy
Scaling down a portfolio
If you have multiple pharmacies, you may want to scale down your workload by selling one of your pharmacies. You can sell via a share purchase which involves the buyer becoming part of your company and taking on all liabilities, or an asset purchase.
Selling your pharmacy gives you the opportunity to receive cash value from the business you’ve built and fund your retirement and estate. You’ll also have the opportunity to manage the legacy you’ve built with certain selling agreements/stipulations, which may be appealing if you want to ensure your community will continue to benefit from your pharmacy.
Reaping the rewards
If you've got a profitable pharmacy and you just want to enjoy some of the money you've rightly earned, selling can be a great way to gain lots of capital that you can use to fund new ventures, recreational activities or lifestyle purchases. But as always, don't sell until you've worked with an agent who can help you get the best possible asking price.
Lack of funding
The NHS advance of £370m’s repayment plan dictated that repayments were due from 31st of October 2021 until 31st March 2022. The funding awarded will now remain the same and won’t change for next year - so pharmacies must rely on their own activities for generating profit. The most common route is to increase services or change opening hours.
Stepping aside for a recovering business
If you’re running a pharmacy and you’re seeing profits drop and have forecast that without funding, things may get worse, you may consider selling rather than creating new services. Aside from the staffing and experience burden these services may present, you may find that you’d rather just move on to a new venture.
The current pharmacy market remains attractive to first-time buyers, who have a keen interest in running their own pharmacy and may have the business plan and funding applications required to establish the new services you cannot afford. While you could potentially refinance or seek funding, selling means you’ll be able to step away with the added reassurance that a new buyer can bring fresh funding to your pharmacy.
Buyer demand for pharmacies with a turnover of less than £500,000 is not as strong as that of those generating £750,000+. If your property is currently over that top bracket but on a declining forecast, selling now can increase your chance of capturing buyer attention and getting as much value as possible from the sale.
Why you need to conduct pre-sale research
If you’re considering selling, have you done the groundwork that will enhance your chance of success and also increase your asking price? Remember: Rangewell's selling agents can help you navigate this process to make research far easier and straightforward.
This research includes an initial assessment of the market - are there other pharmacies up for sale nearby? What sort of asking price do they have and how do their facilities compare to your own? If your pharmacy has more services and higher footfall than a competitor, it warrants a higher asking price - but you need to know these facts for certain before you can start attributing value to them.
You need to consider how the sale may impact your legacy - whether you’re retiring or moving to a new venture. Selling to the right new owner can help ensure your pharmacy remains a popular asset to the community and also helps make the overall sales process easier. If you have a buyer who is invested in the pharmacies success, you’ll be able to work together during negotiations to map out a great future that will please both of you. Selling to the wrong buyer could lead to delays, complications and even a quick sell-off to a pharmacy chain.
Factors you need to consider going forward include:
- How will you assess the buyers? Do you want to use a specialist agent who can help vet them against your criteria - or are you less concerned with legacy and just wants the sale to go through as quickly as possible?
- Are there any upcoming threats to the economy or your local community that could cause problems for the sale? For example, if there was a new construction site getting underway with a planned pharmacy.
- How will you protect your current employees during the sales process and afterwards? While there are elements of this that you can make legal via a contract, you should be realistic about what the sale means for staff.
- Do you have suggestions for lenders that you can pass to the buyer? If you have an existing relationship with lenders or have worked with a broker like Rangewell in the past, you might be more comfortable completing the sale with a buyer who is backed by a lender you can trust.
- Alternatively, if the buyer is interested but thinks they can’t afford it (this can often happen if the buyer is someone who works at the pharmacy and wants to buy it from you), you can use our brokers to work with your buyer and explore options they may never have considered in order to get the right finance package.
Share and asset purchases
When selling, you’ll either be selling the pharmacy as a share or asset purchase. A share purchase is when the buyer will buy shares in your company to become the owner. They’ll take on all of the goodwill, stock, fixtures and liabilities of your business and you’ll be free to move on once the NHS license is transferred.
An asset purchase sees you selling your pharmacy and its assets, but not shares in your company. This means the buyer is not eligible for any existing liabilities, and often you’ll need to notify the NHS license well in advance as it can take 3 months for a change of ownership to occur. You’ll need to obtain NHS England chance of ownership consent whilst you’re still in control of the pharmacy.
Establishing the deal
When a buyer approaches you or your sales agent, they should already have lender finance agreed - or at least have an indication of the funding they will be able to secure. Hiring a selling agent can help prevent time wasters and sometimes even using a specialist finance broker like our own team to assist the buyer can be helpful in ensuring they have access to the best funding options and can meet your asking price.
When the buyer has an agreed finance package and wants to progress, you’ll need to create a head of terms agreement. This basically means you won’t try to sell your pharmacy to anyone else for a period of time and also outlines the main principles of the agreement.
Their solicitors will perform due diligence to check every aspect of your pharmacy, so expect to feel like they’re combing over everything - they are. Due diligence solicitors are there to protect the buyer and the lender so they know they are purchasing the right business.
As a seller, you can help speed up this due diligence process by ensuring you have well-organised records and can provide access to the areas the solicitors will want to review. The seller’s solicitors will look for:
- Three years of your pharmacy’s accounts
- Any regulatory issues or compliance
- NHS contracts and P43 schedule payments
- Staff contracts and salaries
- The value of fixtures, fittings and assets
Protecting your staff with TUPE
If you’d like to ensure your current employees are considered in your deal, you can negotiate this with the buyer. The Transfer of Undertakings Protection of Employment (TUPE) applies to asset purchases only. This ruling aims to protect employees during a change of ownership by ensuring the conditions of their employment remains the same. It outlines the legal duties of the seller and buyer alike in how the employee’s liabilities will be protected.
Of course, your new buyer’s plans for the business may impact those conditions. They must then include measures around how they might restructure the workforce, how hours might change and how changes to terms of employment could impact employees.
As the seller, you must then consult your employees and take feedback on the buyer’s measures. If you do not perform this step, your employees may launch an employment tribunal against you and the buyer.
You need to ask your solicitor to ensure that the buyer indemnifies you for any TUPE liabilities that may occur after the sale - otherwise you may find that employee legal action can be levied against you.
While you’ll have likely worked with a sales agent to determine an asking price, you need to understand the way a buyer will formulate their own offer. The buyer’s lender will utilise an independent valuer to come up with an estimate to ensure they feel their investment is at the right market price.
This makes setting your own price at a realistic level based on market research even more important - mainly to limit the potential surprise and disappointment you could experience if you completely overestimate your pharmacy’s value. Remember: it’s not a slight on you or your business, but the buyer’s own lenders will not issue funds unless they perform a valuation to ensure the value of their investment.
After valuations and due diligence, your solicitors can begin to draft the Sales Purchase Agreement, or SPA, which outlines all of the considerations such as the rights of each party and what is included in the sale.
You will have to establish warranties, which a solicitor will help you with - these are statements of fact that you warrant certain guarantees like there are no existing claims or litigation in action against your pharmacy.
Exchange and completion
Once all negotiations are done and both parties are satisfied, your solicitor will exchange the SPA with the buyers. Completion can happen the same day as this handover or be set at a future date, which may be useful in the case of delayed NHS license transfers.
NHS England must update its pharmaceutical list to reflect the change, so the completion date should align with the date of that change. Provided everything works as intended, you’ll then have the funds issued to you from your solicitor.
Why work with Rangewell
Work with our dedicated pharmacy and healthcare selling expert today. We'll provide advice and guidance throughout the process and manage the sales aspects for you. By navigating the trickier elements of the funding and finance side of the sale, you'll benefit from a smoother, faster sales process.
Should you also wish to introduce your buyer to us, we’re also a broker that can help buyers secure funding to buy your pharmacy.
Ultimately, your sale is dependent on a good relationship with your buyer. You want them to benefit from the best possible funding options so that they can meet your asking price. By contacting Rangewell during the selling process, we may be able to help advise and can certainly work with potential buyers to explore their funding options.
Get started today with Rangewell.