Buying A Pharmacy: Due Diligence

“Make Sure it is Not a Money Pit!”

The Money Pit is a 1986 American comedy film about a couple who attempt to renovate a recently purchased house. It turns out to be a very costly mistake, a MONEY PIT.

Don’t make the same mistake when buying a pharmacy. Make sure you know exactly what you are getting for your money. Ensure you know everything you need to know to protect your long-term financial future.

Remember the selling agent is exactly that the agent looking after the sale for the purchaser. They will do everything they can to get the maximum price and therefore maximum commission and fees possible.

They owe you nothing. The seller is accountable for the information passed to you. If you need help with funding the purchase don’t automatically go to the same company or a company associated with the selling agent. It is very likely that there are better deals elsewhere.

To determine your offer make sure you have ALL the necessary information from the seller. If they are unable or unwilling to provide it, withdraw from the buying process. Don’t worry about the deal falling through. If it does it is likely that it wasn’t right for you and you have been saved from making a costly mistake.

Many pharmacies coming to market (400+ Dec 17) are overpriced and unsustainable. Many buyers will regret their inflated purchase in the future.

Initial information required is as follows:

  • Asset or company sale
  • Location
  • Competition
  • NHS England, Local authority and CCG plans for the area
  • Opening hours
  • Length of transferable/new lease
  • Rent
  • 12 months Schedule of Payments
  • Nursing and residential home MDS items as well as the frequency of dispensing (7 day; 28 day?)
  • End of financial year stock takes
  • Staff lists including Name, Role, Qualifications, Start Date and all Remuneration/benefits; 12 months PAYE records for all staff
  • 12 months Locum/contractor fees
  • 3 years of annual accounts
  • 2 years cash flow analysis
  • 2 years bank statements
  • 2 year I&E; 1 year forecast I&E
  • 1 years VAT returns
  • Fixtures, fittings, external and internal standards of maintenance, décor and presentation
  • Equipment
  • 2 years OTC and GSL sales
  • List of all suppliers with details of contractual/non-contractual agreements plus discounts, rebates, commission, etc.
  • Outstanding rental, loan and credit agreements

Later on included in due diligence:

  • Information about any recent or pending complaints/enquiries/inquiries/tribunals/legal, disciplinary, grievances, appeals, petitions, performance, HR related cases/issues
  • Other commitments and liabilities not previously declared.
    This is a Guest Post provided by Brian Austen of EpocHealth

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