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Compliance Blog - R.J. Hedges & Associates

3 Roads To Sell Your Pharmacy

[fa icon="calendar'] Thu, Jun 25, 2020 / by Becky Templeton

RJ_Hedges-3-roads-to-sellWhether you’ve worked your whole career building your business, inherited or purchased from family, or more recently acquired the business, at some point all owners start to think about the next chapters of their life and selling their business.  The world of pharmacy isn’t much different from other businesses in this sense, and it can be hard for an entrepreneur, visionary, and owner to start forecasting life without the business they’ve given so much of their time, energy, focus, and money.

To say there is an emotional attachment may be an understatement.  While some owners can’t wait to dump their business, I’d be willing to bet the majority of pharmacy owners truly love their business, employees, and patients.  Being so engrained in the community, it’s hard for owners not to worry about their patients.  Owners worry about the level of care, or access to care, their patients may, or may not, have should they sell their location.  In some instances that worry for their staff and their community leaves owners holding onto the business much longer than maybe they initially wanted.

There are 3 roads to selling a pharmacy location; Generational Sales, Independent Sales, and Chain Pharmacy Sales

There are 3 roads to selling a pharmacy location; Generational Sales, Independent Sales, and Chain Pharmacy Sales

  • Generational Sales- Keeping it all in the family. In my eyes, the easiest transition is a generational sale. Generally the family has own the business for decades and already made a move from one generation to the next, be it Parent to Child, Grandparent to Grandchild, or some other familial combination. Usually these are done as stock sales and everything stays the same except the name of the owners. It’s a great way to keep a legacy going, and allow for fresh eyes and ideas to pour into an established business, while helping a family business continue to grow.

  • Staff Member or other independent pharmacy owner- Unfortunately, not all owners have family members to pass their legacy to, but they may have employees or neighboring colleagues who wish to keep that independent alive and thriving. There are also plenty of business people and investment groups who purchase and operate independent pharmacies. While some owners wish only the best for their former employee or colleague success, sometimes it’s painfully difficult to watch changes, either good or bad, happen to the business the former owner spent years building so finding the right buyer is crucial.

  • Chain Pharmacy- They seem to be everywhere, from the grocery stores, to the busy street corners of small towns and large cities, even in airports and shopping centers, Chain or Branded Pharmacies are everywhere, and they are always looking to absorb more patients into their care. As an Independent Pharmacy owner, you may not be wild about the idea of selling your files and sending your patients to a box store environment, but when looking at numbers, they may be the only people with the funds to purchase the pharmacy. The patient’s will be provided care, but not as good as the superior care as an independent pharmacy.

So how does one go about selling their locations on any of these paths? If selling generationally, most people will sell as a stock sale, and if selling to a chain, most will sell as an asset sale, while selling to a staff member or other independent owner could go either way.

 

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So, what’s the difference between a Stock and Asset sale?

  • A Stock Sale is where the stock of the corporation is purchased. You are buying the corporation and all of the corporate assets comes with the corporations. The advantages are the buyer retains all of the contracts, pharmacy numbers, and takes over the current corporate tax year filings, inventory and prescriptions files. This is a very clean and fast way to purchase the pharmacy. The disadvantages are the unknown. The buyer assumes all liens, debts, DIR Fees, bad decisions from the past. The due diligence part of the purchase must be extensive to ensure there are no ghosts that can come back to haunt you, because they will be yours to deal with.

  • An Asset Sale is where the assets are purchased, everything within the four walls as specified in the purchased agreement. The buyer is basically starting from the beginning, but with an existing pharmacy. The ghosts from the past stay with the seller, including DIR Fees. The buyer has a Power of Attorney to operate using the Seller’s pharmacy numbers, during the transition period, so the pharmacy can obtain their own pharmacy numbers and contracts. This can take 3 to 5 months, depending the complexity of the state licensing board, DEA and PSAO requirements.

What do you do once you have a buyer and you’ve determined how to sell your pharmacy? You also need to ensure you have all your legal bases covered and have all the paperwork for the sale in place. I would NOT do the paperwork on your own; just because you can buy the templates online doesn’t mean you should. You should consider working with an attorney or broker who has bought and sold pharmacies before, as it’s a totally different process than buying and selling other businesses. They can help with the due diligence of the seller, represent you in the transition phase and will daft all the necessary paperwork for the sale.

If you are thinking of selling your independent pharmacy and would like to chat about the options, please reach out! At R.J. Hedges & Associates, we can help with Pharmacy Valuations of your current pharmacy or pharmacies you hope to purchase, Buyer or Seller Representation during a sale, and Full Brokerage from marking the pharmacy through closing.

Be sure to check out some of our other BLOGs including:

Topics: Pharmacy Brokerage

Becky Templeton

Written by Becky Templeton

Becky is a Board Certified DME Specialist and Accredited Business Intermediary. Her education and training background fuels her desire to understand how things work, while trying to get the simplest answers and best methods for implementation. She is the go to woman for R.J. Hedges’ training and the voice of many of our videos.

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