How to buy a pharmacyOwning your own pharmacy can be a lot of work, but it can also provide pharmacists with more freedom, job satisfaction and potentially a higher income.Buying a pharmacy can be daunting but the following steps can help you navigate the process:First, as a potential buyer you will need to identify the type of opportunity you’re looking for. Contacting the active pharmacy brokers in Ireland is a great place to start. These firms maintain databases of active purchasers with whom they share opportunities as they come to the market.Next, you should assemble a team of advisors. You will need specialised legal advice and a commercial advisor who is experienced in buying and selling pharmacies. This party will help you judge the underlying value and financial viability of the business and will work with you to identify the best funding options.You will require sufficient equity to complete a transaction. Typically, a bank will lend 3x to 3.5x maintainable EBITDA (earnings before interest, tax, depreciation and amortisation). In some case this may stretch to 4x. The remainder of the purchase price will have to be funded from other sources (savings, family loans etc.).When you make an offer, it will be non-binding, subject to due diligence, HSE and PSI approval and the completion of the legal contracts. You will need to sign Heads of Terms and enter into an exclusivity period (generally runs 10-12 weeks).Once Heads are signed your advisors will commence legal, financial, commercial and taxation due diligence.While lender discussions will occur before you make your offer (most vendors will expect to see proof of funding) the fundraising work will begin in earnest once you are selected as the preferred bidder. Your commercial advisor will submit funding proposals to the active pharmacy lenders who will in turn seek evidence about the present and future financial health of the target business. They will also be interested in your track record as a pharmacist and business person.Your legal team will draft the share purchase agreement and ancillary transaction documents. These documents will be negotiated between the solicitors until both are satisfied that they accurately reflect the substance of what was agreed, allowing for any issues identified during due diligence. While the Heads of Agreement are non-binding, they are the basis upon which the share purchase agreement is prepared, so it is important that they are accurately drafted.Both the PSI and the HSE will be notified of the transaction. The PSI will carry out an inspection to ensure all regulatory requirements are met.The various lenders to whom your commercial advisor has submitted funding proposals will reply with credit approved term sheets. The most suitable lender will be selected based on terms offered, market knowledge and other factors such as your relationship based on past dealings.Once the lender is selected, they will issue a Letter of Offer and appoint a solicitor to act on their behalf. This solicitor will be paid for by you and will ensure that the transaction is in line with the bank’s legal requirements and that suitable security is in place.Once all due diligence and legal documentation is complete, and funds are available to draw, the transaction will complete. The change of ownership will be registered with the PSI and a new contract will be issued by the HSE.Within three months of the transaction, closing completion accounts will be prepared to cover the period up to the date of closing. These completion accounts will form the basis of any final payment that may be due to the vendor.While all of this may sound daunting it’s actually more straightforward than you might imagine.The leading financial advisor to the Irish community pharmacy sector and the leading pharmacy sales brokerage firm in Ireland. Our exclusive pharmacy team are not just financial experts in this market but are passionate advocates and creative thought leaders helping to drive the sector forward. If you would like to discuss the process of acquiring a pharmacy, please contact Johnny O’Sullivan in our corporate finance department.Further Articles How to value a pharmacyThe flood of cheap capital over the past decade has seen enterprise valuations become… Read Blog The Quickest and Easiest Way Pharmacies can Double Their Health and Beauty Customer BaseIs 2021 The Year That The Men’s Beauty Market Goes Mainstream? Men’s interest in… Read Blog
