Vertex Law

Preparing to sell your pharmacy

by Nick Austen and Ed Gardiner-Hill

Nick Austen and Ed Gardiner-Hill, pharmacy specialists at Vertex Law, explain how they can make your life easier (and keep professional costs down) when you are trying to sell your pharmacy.

Pre-sale Preparation

If you are thinking about selling your pharmacy you need to make sure that you and your affairs are prepared and organised. Our pharmacy team buys and sells pharmacies every month. We adopt a pro-active approach in our work with pharmacists and our view is that thorough pre-sale preparation is a must. Think about what a buyer and his funder is looking for and try to make sure that you have the information that they will require ready for them and that there is nothing in the information that will put a reasonable buyer off buying the pharmacy.  To state the obvious, the more prepared you are the less stressful and drawn out you will find the sale process, and the cheaper your legal costs will be.

Are there any areas you should particularly focus on?

Property

If the pharmacy occupies a leasehold property make sure that you have a reasonable amount of time left on the lease (preferably more than seven years).  Remember that a buyer’s funder will often want to make sure that the pharmacy will be in a stable location for some time.  If you have a freehold property, do you want to sell it with the pharmacy or retain it and lease the whole or part of it to the purchaser? 

If you have any special arrangements with neighbours regarding parking or access which are of benefit to the premises then try to have them documented by a solicitor and agreed with the neighbour so that they will continue to benefit the buyer.

Have you undertaken an asbestos survey as the current law requires? A buyer (and his funding bank) may insist that a survey has been carried out (at your cost) to show that there are no likely asbestos problems.

Employees

Do you have signed employment contracts for all your employees?  Are they up to date?  Do you pay all your employees through the PAYE system (i.e. not cash in hand)?  Many purchasers will require each of the employees to have a signed contract and will be wary if any employees are paid cash in hand.  The NPA has a standard employment contract which is commonly used. Are your locums really self-employed? Do you have a written agreement with them?

Accountant/Tax Adviser

You need to talk to your accountant and make sure that:
• the accounts for the pharmacy show a clear picture and do not contain any items which are not for the pharmacy business.  The buyer and his accountant will be checking this and will expect you to warrant that the accounts are correct.
• you understand what your tax liability is likely to be on sale and take any sensible steps to minimise it.
 

NHS Returns and OTC

Make sure you have copies of all the FP34s for the past three years, figures for OTC sales and your form HN1.

Local Doctors’ Surgeries and Pharmacies

Keep a file with any information that you receive regarding changes to local doctors’ surgeries and applications for new NHS pharmacy contracts or relocations as a buyer will want information regarding these.

Stock

A buyer will normally pay £ for £ for your saleable stock according to a valuation by one of the usual trade valuers.  In order to get an idea of what they are likely to pay, the buyer is likely to ask to see the last two or three year end stocktake certificates.

Long Term Contracts

A buyer will want to see what long term or major contracts you have and particularly any contracts linked to the purchase of stock or other items from particular suppliers/wholesalers and your arrangements in relation to computer hardware and software. Do you supply care homes? If so, are there written arrangements in place?

Funding

If you have any loans linked to your business you will need to look at them carefully and (at the right time) talk to your funder about the sale.  For example, if you run your pharmacy through a company and have granted security to a bank then you should anticipate that you will need to get your bank’s consent to the sale.

Vertex Law are pharmacy specialists.  It is based at 23 Kings Hill Avenue, Kings Hill, Kent ME19 4UA. Visit www.vertexlaw.co.uk for information or contact Nick Austen on nick.austen@vertexlaw.co.uk or Ed Gardiner-Hill on egh@vertexlaw.co.uk, 01732 224000.