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How To Prepare To Sell Your Pharmacy

Friday, September 15th, 2017

Choosing to sell your pharmacy is an important decision. Your business is the culmination of years of work and sacrifice. It is an understandably difficult choice to make, but one that all business owners will likely face. Whether you are selling because you received an offer you cannot refuse or you are moving on to something else, the decision will not be easy.

Selling a pharmacy without the proper preparation is all but impossible. You may overlook a crucial aspect of the process if you try to sell your business without understanding the various legal steps. Accountants, lawyers, and brokers can provide you with invaluable advice as you consider the benefits and risks of a particular sale. Here are a few things to consider if you are thinking about selling your pharmacy.

Steps for preparing to sell your pharmacy

There are two broad aspects of preparing to sell your pharmacy. You must first identify the buyer or buyers who are interested in your company. Secondly, you must permit the interested buyers to conduct a due diligence analysis. Identifying interested buyers can be accomplished in different ways, depending on your situation. If you receive a lot of unsolicited offers, you can skip this step. Otherwise, you should consider the competitors and buyers who want to enter your particular market area. A broker can assist you through this process.

Due diligence refers to the investigation that a buyer conducts into all aspects of your pharmacy to determine if your business operations were sound. Conducting proper due diligence is the burden of the buyer, but will require you to provide significant amounts of information and documentation for review.

A due diligence search typically consists of site inspections, title searches, records checks, a review of your financial books, intellectual property, and other assets. If you do not comply with the investigation, the buyer will likely be wary and refuse to follow through with the sale. Due diligence investigations can be invasive, but they are a necessary part of every business sale.

Understand valuation of your pharmacy

There is no set definition for value, so giving your pharmacy a value can be difficult to do before any offers have been made. The value of a business changes depending on the nature of the sale and the current market. However, there are some general rules on which you can rely. Most valuation experts will consider the present value, future liabilities, equity, and potential profits in order to come up with a number.

Valuing a pharmacy is extraordinarily complex. Small businesses, unlike publicly traded companies on exchanges, have no readily available market to determine their value. Hiring an appraiser can help you get the value of your pharmacy. A valuation is crucial because it gives you the range for which you can expect to charge a buyer for your company. The valuation can also serve as the starting point in negotiations between you and a potential buyer.

Know how to complete the sale

There are two ways to sell a pharmacy: through an asset purchase or an equity purchase. Asset sales occur when the buyer purchases the majority or all of the assets that you use to operate the pharmacy. A buyer will acquire your building, inventory, intellectual property, and records in this type of sale. In an asset purchase, you remain responsible for any remaining assets, if any, and any past liabilities, as well as the legal entity that used to operate the pharmacy.

You can also sell your ownership interests in your business through an equity sale. In this type of transaction, the buyer will not acquire the pharmacy’s assets, but will acquire the ownership of the legal entity that operates the pharmacy (i.e. the corporation or limited liability company). In most cases, this type of sale allows the new owner to run the pharmacy without any interruptions, without changing things like tax ID numbers or Medicare provider numbers. Speaking with an experienced attorney can help you navigate the paperwork that is required for this type of sale in your specific state.

Obtain expert legal advice when selling your pharmacy

By practicing due diligence, properly valuing your business, and creating a written contract, you can avoid litigation and successfully sell your pharmacy. If your company needs the advice of an experienced lawyer, contact the legal team at Brown & Fortunato today. Our expert attorneys can help you prepare to sell your business and complete the transaction safely. Give us a call at (806) 345-6300 or Contact Us via email to learn more about our Practice Areas and how we can help you. You can also visit us in person at 905 S. Fillmore St., Suite 400, in Amarillo, Texas.

This information is subject to change. Please check for updates that are more recent than the published date of this article.