What to consider when buying a pharmacy
Read time: 5 mins Added: 19/06/2023
You have found a pharmacy that you want to buy, terms are agreed and advisers appointed but what do you need to consider next to ensure the purchase runs smoothly? Here are the answers to the common questions we get asked (or that need to be considered during the initial stages of the purchase process).
The seller is asking for a deposit to secure the purchase, is this normal?
Deposits are not unheard of in pharmacy transactions. The main purpose of a deposit is to offer the seller some security that you are committed to the purchase. Any deposit should be proportionate to the overall purchase price and should be refundable in certain circumstances. We would always advise that a buyer makes sure the terms of any deposit agreement are reviewed by a pharmacy solicitor before signing and paying any deposit.
How do I ensure that the seller won’t offer the pharmacy for sale to someone else?
Your solicitor should seek an exclusivity period from the seller (usually in exchange for the payment of a deposit as mentioned above) to reduce the risk of the seller opting to sell to someone else. This timeframe should be agreed at the outset of the transaction with a buyer usually wanting as long as possible and the seller wanting to keep the period to a minimum to keep all parties focused on a set timetable.
The key asset of any pharmacy business is the NHS contract. What do I need to do to make sure I take ownership of it on completion?
If you are buying the assets of a pharmacy rather than the shares in a limited company then you will need to submit a market entry application to NHS Scotland to transfer the NHS pharmacy contract in your name (or the entity you nominate). If you are a first-time buyer then you will also need to complete a fitness to practice application alongside the market entry application. The application should be a collaborative approach between you and the seller and ideally the application should be submitted at the start of the transaction so as to avoid delays later.
Do I have to keep all the current employees at the pharmacy?
Employees are key to any pharmacy business and this is an area that should be handled carefully by both you and the seller. If you are buying the assets of a pharmacy business then the employees are protected by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). You should consult with a solicitor if you want to dismiss any employees or change their terms as failure to comply with the rules could result in employment claims against both you and the seller.
Do I need to do anything in relation to the pharmacy property?
The property is key to a pharmacy. It is essential that you check the property is registered on the General Pharmaceutical Council (GPhC) website as premises where it is permitted to supply and sell medicines. If you are getting bank funding for the purchase then most lenders will put a lot of emphasis on the value of the property from a security point of view. You should conduct searches and surveys to ensure that there are no hidden issues relating to the property.
There are a number of different ways which you can acquire a pharmacy property, for example:
• Purchasing the freehold.
• Taking over the existing lease from the seller.
• Requiring a new lease.
If the property is leasehold and you are taking an assignment of the seller’s existing lease or seeking a new lease then usually you will need the landlord’s consent for either the grant of a new lease or transfer of the existing lease. A good legal team will run this in parallel to the main purchase process.
How do I find out about the current operations of the pharmacy so I know what I am purchasing?
Your solicitor should issue a questionnaire, known as due diligence enquiries, asking questions about the business, employees, property, operational matters, insurance and financials. You and your solicitor will then review the responses, raise any further enquiries and make sure that adequate protections are included in the main sale and purchase agreement.
Author: Gemma Mintram is a Partner in the Corporate team at Knights plc. She supports the NHS and private healthcare providers on a range of corporate matters, including business sales and acquisitions, mergers, joint ventures, management buy-outs, private equity investment, corporate refinancing and company reorganisations. Knights has a specialist team of pharmacy solicitors and regularly act on over 50 pharmacy transactions each year. For more information visit Knights website.