We often get asked by prospective pharmacy owners (particularly first time buyers): what are the key items that need to be addressed before acquiring a pharmacy? We believe that every buyer needs to take the following into consideration:

  1. Structuring
  2. Partnership Agreement
  3. Due Diligence
  4. Financing

1.   Structuring

What is structuring?

Structuring is essentially setting up an appropriate legal structure to operate a pharmacy. There are many different structures available to pharmacy owners but it is important to have the right structure for your set of circumstances. The different types of structures may include; sole trader, partnership, trust or company.

What are the benefits of structuring?

The right structure can provide asset protection. Asset protection is achieved by making certain that the pharmacy is owned by a different structure to your other assets. It should limit your personal liability in the event of any adverse action.

The right structure can also ensure that you are able to legally pay the least amount of tax payable on profits generated by the pharmacy. The additional funds retained due to the tax efficiency of the structure can be used as further working capital for the pharmacy or taken as a profit share by the owner.

2.   Partnership Agreement

What is a partnership agreement?

A partnership agreement is a legal agreement that is put in place between two parties that are entering into a business arrangement together. It outlines each party’s rights and responsibilities.

What are the benefits of a partnership agreement?

A partnership agreement is incredibly important if you are looking to acquire a pharmacy with an unrelated party. It can prevent any heart ache if the partnership was to breakdown. We have witnessed pharmacists heading to court to resolve partnership disputes that could have been avoided with an appropriate legal agreement.

3.   Due Diligence

What is a due diligence?

A due diligence is where an independent party, such as an Accountant, reviews the Financial Statements and other information pertaining to a prospective pharmacy to ensure that anything that may impact on the valuation of the pharmacy is identified. A due diligence report, will also advise the prospective buyer whether the value of the pharmacy is justified or whether the purchase offer should be reduced.

What are the benefits of a due diligence?

A due diligence will provide the prospective owner with confidence that the price that they are paying for the pharmacy is appropriate. We have had instances where we have advised prospective owners to reduce their purchase offer or not to proceed with the acquisition.

4.   Financing

What is financing?

Financing is the process of receiving suitable funding from the bank to acquire a pharmacy and ensuring the debt is structured appropriately.

What are the benefits of financing?

The benefits of financing is to ensure that you receive the best funding to suit your specific requirements as well as structuring the finance in such a way to maximise the tax deductibility of the debt.

At Pilot Partners, we can assist in helping you to achieve your overall objectives and ensuring that the acquisition of your first pharmacy is a seamless process. If you would like our assistance, please contact Pilot’s Business Advisory Division on 07 3023 1300.