Selling a pharmacy can be a minefield but help is at hand in a new book from pharmacy sales expert Anne Hutchings. In the fifth of 12 monthly extracts, Anne looks at how you should go about choosing the right advisers

Selling a pharmacy business is complicated and it can take a long time. Good advice is essential and will not only save you time and money, but also minimise the stress of the process. The question, then, is not whether you need professional advice, but the type of advice you require.

Team work

As a minimum your ‘team’ should consist of a pharmacy business transfer agent, an accountant or tax adviser, a solicitor and probably an independent financial adviser. The first adviser you contact should be a pharmacy agent for the simple reason that the first step is to find out how much your business is worth. A good agent should be able to provide you with a valuation, produce a detailed information pack and sales memorandum, and introduce you to genuine buyers with the funding to purchase your business.

The agent should deal with all the buyers, negotiate the best price, terms and conditions of sale, go on to prepare the heads of agreement once the terms of the sale have been agreed, and oversee it through to completion. Pharmacy is a specialist area, so choose an agent who specialises in the sector. Recommendation is always helpful, whether it comes from a trade body like the NPA or a colleague who has recently sold their own business.

Make sure you understand the agent’s fee structure and terms. Some agents operate on a ‘no sale, no fee’ basis, while others have sign-up fees, or fees if they find you a buyer but you don’t proceed with the sale. The fees charged to sellers range from 0-6 per cent of the sale price (calculated as goodwill, and fixtures and fittings).

The fee from respected pharmacy agents who act for you as the vendor is around 3 per cent but may be negotiable on large sales. There are ‘zero fee’ agents who do not charge you, but make their money by charging the buyer they introduce to you. If the buyer is paying the agent, then that is who the agent is acting for.

This is the worst scenario for you as a seller, since no one will be looking after your best interests. Low commission agents charge a small percentage of the sale price, so again you have to ask where their full fee is coming from. If an agent offers to sell your business for 1 per cent, it is likely that the rest of their fee is coming from the buyer.

The right accountant

Your natural instinct may be to ask your existing accountant to handle the accounting and tax issues relating to the sale of your business. The reality is that most accountants don’t have much experience of business sales. Time and again I have seen pharmacy sellers receiving poor and downright costly advice from their accountants.

Your accountant should be able to conduct a pre-sale tax planning review, and provide advice on ownership of the business, how to minimise any tax payable on the sale and how to extract cash in the most tax efficient way. They should be able to prepare management accounts that present your business in the most advantageous way to buyers and calculate all the balance sheet adjustments applicable to company share sales. If your accountant does not have the expertise to handle these areas, you could appoint an agent who has the skills in-house and who can either work with your existing accountant or take over completely when required.

Once you have a shortlist of firms to contact, prepare a list of questions for them. As a guide, you might ask them how many pharmacy sales they have been involved with in the past two years and what services they provide. Are they able to provide tax planning advice on the sale of a business?

You will also want to know how their fee structure operates and should ask for an estimate. The cost of accountancy services will depend on the amount of work involved. If you can obtain a fixed fee, it will be easier to budget and there should be no nasty surprises.

As a rough guide, you should budget for fees of between £2,000-£5,000 for a sole trader/partnership and £5,000-£10,000 for a single pharmacy company sale.

Instruct early

It is helpful to instruct a solicitor at the outset because legal issues often arise early in the sale. Find someone who knows the sector, since inexperience will inevitably extend the sale and push up costs. Delays cause frustration, and the longer a sale goes on the more likely it is to fall through.

Your solicitor should be able to advise you on the sale and purchase contract, which will often contain clauses that are pharmacy specific, such as provisions relating to category M clawback, information on prescription items and conditions relating to transfer of ownership. They should also advise on due diligence and warranties (which may allow a buyer to make a claim against you after the sale has been completed), and property transfer, whether leasehold or freehold. Check whether your solicitor’s main area of expertise is in corporate transactions, such as buying and selling businesses, or whether they specialise in pharmacy transactions.

Ask whether they deal with many transactions relating to leasehold or freehold business premises. The cost of legal services can vary widely. As a rough guide you should budget for fees of between £5,000-£10,000 for a sole trader/partnership and £10,000-£20,000 for a single pharmacy company sale. Remember that good professional advice should make you more money than it costs. As an additional bonus, buyers who see that you have industry experts acting for you will know that you really mean business.

 

Anne Hutchings has been dealing with community pharmacists for over 20 years and has built up her company, Hutchings Consultants, to be the UK’s largest independent pharmacy sales agency. ‘Selling your pharmacy for all it’s worth’ (£12) can be ordered from Amazon (ISBN 9781 7846 22411) or from Hutchings Consultants. For a free copy (while stocks last) complete the form online at hutchings-pharmacysales. com or send a cheque for £12 (payable to Hutchings Consultants) to Hutchings Consultants Ltd, Maple House, 53-55 Woodside Road, Amersham, Bucks HP6 6AA