Pharmacy Valuation and Assessment
“If you don’t build your dreams, someone will
hire you to help build theirs.”
– Tony Gaskins Jr.
Are you looking to purchase a pharmacy or a drug store? EVCOR can help you assess what an appropriate purchase or sale price might be, as well as uncover any potential missed opportunities that could increase the value of your pharmacy business for sale and add profit to your bottom line. Or, perhaps you need help with the due diligence or offer process? Our approach identifies key points in the pharmacy business that may have gone unnoticed to make sure you’re making a well-informed purchase. Please read below about the typical phases of a pharmacy purchase. Contact us today to learn more!
The Five Phases of Buying
Buying a pharmacy isn’t easy. In fact, pharmacy owners can vouch that purchasing your independent pharmacy is one of the most daunting transitions you will ever experience — and it’s a big step not just for yourself but also for your employees and, of course, your customers. We have identified five phases in the acquisition process.
Phase 1 – The Search
This is a crucial step when you are buying a pharmacy. You will need to decide where you want to buy, as well as how you will go about acquiring the business. Consider whether you would prefer a rural location or a location in the city; each has advantages and disadvantages. Financing can be an issue for a younger pharmacist, so make sure you look into partners and potential funding sources. You might want to consider a speciality pharmacy if you have special skills, such as compounding.
Furthermore, since starting the process will incur expenses, be sure to save up in advance for any lost wages or consultants that may need to be hired. It is best to contact a broker or transaction advisor who deals with motivated sellers. A direct approach can often be met with hostility from pharmacy owners, so exercise caution when considering this option.
Phase 2 – Valuation and Preliminary Due Diligence
When conducting preliminary due diligence before moving on to the next phase of confirmatory due
diligence (typically performed after an offer is accepted), it’s important to research and evaluate a potential business purchase. This involves asking questions, reviewing financial statements, and looking at source documents and contracts to identify potential issues or risks. To assess the pharmacy, you can use a combination of assessment tools, such as rules of thumb and “sniff tests,” but the gold standard at this point is to get an official valuation. It’s important to be mindful not to get stuck in analysis paralysis, as you don’t want to miss out on a great opportunity due to unnecessary delay. Additionally, remember that you won’t be able to check the accuracy of all the seller’s claims until it is time for confirmatory due diligence. At this point, you will want to be comfortable with the non-binding offer you are putting forward, which will be subject to additional scrutiny of the business.
Phase 3 – The Offer
Once you have decided that this pharmacy is right for you, it is crucial to take the next steps to ensure your offer is strong and accepted. First, enlisting advisors such as a valuator with specific pharmacy experience can help identify any potential issues or nuances that could be crucial when framing the offer. It would also be beneficial to obtain the services of a lawyer to ensure that your non-binding letter of intent is appropriately prepared. Taking these extra steps will demonstrate your commitment and dedication and help ensure that your offer meets all legal requirements. Furthermore, it reflects positively on your character and shows you are serious about closing the deal. Having a well-crafted offer increases your chances of having it accepted and will help you move forward with the acquisition process.
Phase 4 – Due Diligence and Definitive Agreements
Once your offer is accepted, the next step is to conduct confirmatory due diligence (DD). This involves verifying all the details you were given in the preliminary stages and ensuring they are still accurate and up to date. You must ensure that everything matches what was presented during the initial negotiations. To do this, you must review all the documents and perform background checks on all parties involved.
Your lawyer will also begin preparing the definitive purchase agreement (DA or DPA)—the first draft is customarily prepared by the buy side. This agreement should detail all aspects of the deal, including payment terms, warranties and indemnification clauses. In addition, your lawyer will conduct legal due diligence to ensure that all legal matters related to the deal are in order. Finally, in the case of a share purchase agreement, it is advisable to have your accountant conduct tax due diligence. Once you have completed this process and both parties have signed off on the definitive purchase agreement, you can move on to the closing process.
Phase 5 – Closing and Beyond
The Closing Phase is an intensive one, with plenty of tasks to be completed. You will be removing
any conditions that have been placed on the agreement, such as financing or due diligence conditions. If applicable, you will enter into a new agreement with the banner provider. An inventory of the pharmacy will need to be conducted, and you will need to meet your new staff. After all of this is completed, the closing date arrives – what everyone has been working hard for. Even after this, there may still be some closing financial statements to complete, as well as settling any holdback or earnout amounts.
Let’s Get Started
Are you an entrepreneurial pharmacist ready to take your career to the next level? Are you looking for autonomy, alignment with your values, and financial rewards beyond what you could get working for someone else? If so, then it’s time to seriously consider purchasing your first independent retail pharmacy.
Right now, there are more buyers than sellers, so you’ll need to stand out as an exceptional candidate. Our team can provide guidance and support to help you learn how to recognize opportunities in a newly acquired pharmacy, avoid common mistakes, and develop a long-term success strategy.
Click here now to register as a buyer and take the first step towards becoming an independent pharmacist-owner. With the right guidance and enough dedication, you can be well on your way to achieving your goals!
Also, please watch for our new book, “The Pharmacy Buyers Guide – Your First Pharmacy” coming in the summer of 2023.
If you’re interested in purchasing a pharmacy in Edmonton, AB, Calgary, AB, Toronto, ON, British Columbia, Saskatchewan, or anywhere in Canada, EVCOR experts are here to help you determine the true value of a pharmacy business. Our goal is to assist individuals and entrepreneurs in finding the perfect pharmacy to match their aspirations and objectives, thus fostering growth and innovation in the field. Connect with our advisors to gain valuable insights into the business valuation of a drugstore or a pharmacy for sale in Canada.