An Expert’s Guide: Stepping onto the Pharmacy Ownership Ladder

Fitzgerald Power’s COO and expert in pharmacy transactions, Noel Winters’ 20+ years of experience in turnover stabilisation and growth, profit performance and cashflow maintenance is here to help.

Don’t be afraid to put yourself out there and be open to all conversations, that is the first thing I tell any of my clients. As an advisor to the pharmacy sector for over two decades, I’ve seen the challenges associated with the sector.

The default position of the pharmacist is to care; care about the people they work with, their staff and their business and it shines through as the profession is always identified as one of the most trusted by the general public. Helping your pharmacists step into ownership is, without doubt, the most satisfying element of my work – to be part of the initial nervousness, to exploring the route to the sheer excitement in putting the deal together and then on my side, with fingers crossed, seeing the initial idea come to fruition and set up a way of life……. well what’s not to like?

Unless there’s a history within the family, there’s no doubt that it is a daunting experience. Here’s where we make things easier.

Setting the scene

Stepping onto that ladder today compared with 20 years ago is an entirely different environment. Gone are the days of 100% loans from the bank and facility availability from the wholesalers, as the risk tolerance of lenders significantly reduced.

Today, lenders require a significant amount of savings to be put forward by the promoter to enable them to support the proposition and fit within their lending criteria. While lenders would calculate the maximum facility available based on a multiple of maintainable cash flow, the general rule of thumb is that the banks require the promoter to have 30% of the value of the acquisition to put towards the deal and the bank 70%. That’s a big ask, but no doubt the appetite of the entrant pharmacist is still there and I see that from the calls I get on a daily basis. What I also see is a lot of appetite from existing pharmacy owners to support the entrant pharmacist with their journey.

Raising funds

The difference between the funds available to the entry-level pharmacist and the financing that the banks will offer is called “the equity gap” and what I am finding is that owner pharmacists are looking for investment opportunities and are willing to back a sector that they know so well and fill that equity gap. Any provider of funding will look for a return on that investment. Banks take it in the form of loan interest. If an investment is made in shares on the stock market, a dividend is expected and likewise, if a private investment is made to support an acquisition, a return will be expected. The risk deserves its reward.

When assessing the return levels payable to the private investor, if the opportunity as a whole makes sense over a time period to all parties, well so be it. The sums may seem high, but one must look to see does it work for all parties.

So, how do you put the thought process into action?

1. The more research you do around the subject, the more familiar you become with all the processes, languages, individuals and network in the pharmacy retail sector, over time what seems like an insurmountable fence will eventually become a small hurdle.
2. Talk to the banks, and when talking to the banks talk to their sectorial experts. They will be familiar with lending to the healthcare space and by talking to the right people you will feel that you are talking to people that can really help.
3. Build relationships with key stakeholders in the sector; wholesale representatives, symbol group representatives, financial advisors and experts in the industry. Even reach out to pharmacy owners for a cup of coffee. Everybody has something to share, or a story of previous experience and that accumulation of knowledge will be invaluable. You will never know where an opportunity will come from.
4. Understand your own financial position because nothing will show you’re commitment more than the willingness to put forward your own funds to support your vision.

To give a real-life example: I always recall the day that I got a call in the morning from a pharmacist who had bought a pharmacy unit but was looking to offer an opportunity to a pharmacist, solving his own problems around staffing. That same afternoon, I got a call from a pharmacist looking to see whether there were any opportunities for him to kick off an ownership career in broadly the same location. Five years later, the two individuals have invested in a second pharmacy together. Knowledge is power and conversation is everything.

Over the last three decades, we have made a name for ourselves as the largest pharmacy transaction brokerage firm in Ireland. Offering creative solutions, we provide bespoke pharmacy services for businesses of all sizes, from independent single-unit operators to multinational mammoths. As one of the top accounting firms Ireland has to offer, we use our experience and knowledge of the sector to provide our clients with unparalleled pharmacy M&A advice. For more information on pharmacy acquisitions, contact our expert team through our website today!