5 “must haves” when buying a pharmacy
Buying a pharmacy is not like buying any other sort of business. There are regulatory complexities, interaction between the terms of the contract and the law, an Award governing the employment of the staff and a whole lot of pharmacy jargon and peculiarities in-between. I mean, who else other than pharmacists and pharmacy specialists would know that “FRED” refers to software and not a person, and that a “robot” is a (large and expensive!) dispensing tool, not a computerized, human like character on the floor serving customers!
It follows that when you’re buying a pharmacy, there are some “must haves” which if not put in place, might lead to a few headaches not to mention extra costs and a whole lot of wasted time.
Here’s my top 5 must haves when buying a pharmacy:
A great team
You wouldn’t renovate a house without bringing in the experts (think architect, builder, plumber, painter etc), so why would you make one of the biggest investments of your life and buy a pharmacy without bringing in the experts?
It is imperative to have a great team on your side when riding the rollercoaster of a pharmacy purchase. At a minimum, the team should consist of a great lawyer, accountant and banker. You may also give a guernsey to a finance broker.
A great team will help to remove the emotion associated with the purchase, provide you with objective but practical advice, guide you in the right direction, keep you on track and let you know what you need to do and when you need to do it.
Without a great team, you may miss key points of negotiation, overlook an important step in the regulatory process resulting in annoying delays, not get the best finance deal and endure months of stress in the lead up to settlement.
Clear communication channels
To avoid the risk of messages getting lost in translation, or compromising your legal rights, it is important to have clear communication channels throughout the buying process. This means one, or two at most, avenues of communication with the seller’s team.
Given the temptation created by technology to fire off an email or text message without really thinking it through, my recommendation is to direct all communication between the parties through the respective solicitors. This way you can be confident that messages will be communicated on time and correctly, and that your rights will not be compromised. There may be occasions where your solicitor will recommend that you contact the seller or the broker directly however that will usually be for a specified reason or purpose.
Employees are one of the main assets (and liabilities) of a pharmacy business.
Despite the importance of the employees in a pharmacy, the standard contract terms do not provide a right for the buyer to interview the employees. Making offers of employment to employees who you have not interviews is fraught with danger. And when the purchase is settled, it’s too late to back out of the offers without encountering some employment law issues.
Buyers should ensure that they have a right to interview the employees prior to settlement and prior to being required to make offers of employment. This will require a special condition to be inserted into the contract.
At the same time, buyers should also consider whether the terms of employment that they wish to offer the employees (including but not limited to pay rate, hours, recognition of service) as that too may be something that needs to be dealt with in the special conditions of the contract.
Flexibility with the settlement date
Settlement dates are important however it is fairly unlikely that the settlement date in a pharmacy business contract is the date on which settlement actually occurs.
Often times, the involvement of third parties such as landlords and the Australian Department of Health mean that there are delays with obtaining documents, finalising applications or having the administration number issued. Whilst this is disappointing, it’s also almost inevitable.
Buyers need to be alert to the likelihood that settlement might be delayed and be flexible with their timing. They also need to make sure that the contract appropriately deals with any potential delays as the last thing any buyer wants to be doing is asking for a last minute extension! It’s always best to plan in advance and build in a contingency plan in the contract for if settlement doesn’t occur on the originally scheduled settlement date.
A good scanner!
It should go without saying – but please make sure you have a good scanner to use during the purchase process. There is a fair bit of paperwork to complete and sign. Unfortunately, taking photos of signed documents or only returning signed pages of documents isn’t appropriate and will only incur further costs and time while your solicitor tries to compile the documents as they need to be.
If access to a good scanner is limited, ask your solicitor to provide you with as much as the required paperwork at the same time so that you can sign and scan in one batch!
This article is intended to be for general information only. It does not constitute legal advice nor does it establish a relationship of client and lawyer. Specific circumstances or changes in law may vary the accuracy or applicability of the information published. We recommend seeking specific legal advice particular to your circumstances before taking any action, or refraining from taking any action, on any issue dealt with in this article.