By Brad MacLiver
When a ND pharmacy or drug store is being sold, seldom does the buyer pay “out of pocket” cash for the acquisition. Even when cash is available, pharmacy acquisition strategies usually involve financing the transaction.
Typical acquisitions take 6-9 months to complete, so the
Along with the buyer and seller the acquisition will involve attorneys, accountants, lenders, valuation companies, industry specialists, along with others. No one wants to pursue 6-9 months of work involving a variety of highly paid professionals without having some confidence of the pharmacy buyer’s ability to close the deal.
The process will begin with determining the value of the business. There are many companies that offer valuation services. However, pharmacies in
In order to complete a valuation the selling company needs to provide up-to-date data. Lenders will not accept old data, or a sellers “gut feeling.” Lenders need to make a decision to finance based on sound and verifiable information.
Structuring the transaction is extremely important. The seller of course wants as much money as possible and wants cash. The buyer needs to spread out the debt service and wants to have as little cash as possible invested in the acquisition.
Pharmacies and drug stores are in an industry where it is more difficult to obtain business loan due to the majority of the value in a
ND Pharmacies have typically been known for generating profits and to be stable businesses. However, they are usually in leased locations, and their furniture, fixtures, and computers will only provide $15-20,000 of collateral for a buyer possibly requesting a million dollar loan. A lot of money is tied up in inventory, but the small pills are considered by a lender to easy to move out the door in the event of default. Due to these circumstances many lenders will not loan money to these traditional money making businesses. For a transaction to be a successful one, it takes a lender who understands how the pharmacy industry works.
Tips regarding
1. An attorneys or CPAs who has been representing the pharmacy seller in ND for many years may see the transaction as putting themselves in a position of losing a client when the business is sold over. Be certain that they are working diligently on the transaction instead of slowing or hindering the process.
2. Because the pharmacy acquisitions process takes 6-9 months worth of work to finish, each party involved should stick to their time tables. Important items will much too often end up sitting on the desk of someone that is outside of the control of the buyer or seller.
3. All financial information has to be current and the data supplied to both the buyer and the lender will need to be updated on a continuous basis over the lengthy acquisition process. The situation can change dramatically during a period of nine months, so the
When working on “pharmacy acquisition finance,” make sure the lender and the valuation company are experts in that industry for the highest chance of success. Make sure you are working with company that has the ND pharmacy expertise, experience, and is a direct correspondent with lenders who understand how pharmacy works.
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