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Purchasing The Equity Of A Pharmacy

Tuesday, February 27th, 2018
purchasing the stock of a pharmacy

If you want to acquire a pharmacy, you can either purchase the assets of the business or the stock of the corporation. The following can help you understand stock acquisition and the steps you can take to purchase the stock of a pharmacy.

Purchasing a pharmacy through stock acquisition

In a stock purchase, the buyer assumes many of the liabilities that the previous owner was responsible for. If there are pending fraud issues, like overbilling Medicare, then you could be liable. However, you can assume most of the pharmacy’s contracts without needing to get the consent of the third parties. In order to do this, you must maintain the existing corporation that operates the pharmacy and purchase the company’s stock.

In a stock acquisition, the pharmacy/DME operation remains with the same entity. You purchase the stock, so the entity remains intact and the entity’s EIN does not change. Since the DME operation remains with the same entity, you do not need to get a new Medicare supplier number. It remains attached to the entity’s EIN. Therefore, there is no interruption in billing Medicare for DME services and your business should not experience any financial issues.

Many pharmacies are owned by a handful of investors or shareholders, typically a family or close partnership. Therefore, it is easier to purchase a company by acquiring stock because there are fewer shareholders. You are also less likely to encounter a holdout that might drive up the price.

Buying the equity of a pharmacy allows you to step into the business operations of the company, eliminating the need to renegotiate many contracts. In some cases, a stock acquisition may help avoid the need to obtain new licenses and permits.

Steps to make an acquisition happen

First, find a transactional attorney you trust. There are numerous issues to consider before purchasing the equity of a pharmacy that an experienced attorney can help you understand. Next, sign reciprocal confidentiality and non-disclosure agreements. During a stock acquisition, each company will share sensitive financial information and other data. These agreements need to be confidential to ensure that both parties respect the other company’s sensitive information.

After any non-disclosure agreements are signed, you (the buyer) conduct a due diligence review of the pharmacy. Entire books can be written about due diligence but, in summary, it is an investigation into the company you want to purchase. That means you review the financial books, taxes, filings, personnel, open or threatened lawsuits, contracts, senior staff, compliance program, HIPAA program, billing practices, marketing practices, relationships with referral sources, and other factors. You should review every aspect of the business to ensure that it is a sound investment for you.

Finally, if after due diligence you still want to buy the stock of the pharmacy, you can begin the process of transferring ownership. In an asset acquisition, you transfer leases and the title, execute new contracts, and begin assuming all operations. In a stock purchase, you need to purchase all of the stock from the previous owners. Depending on the number of owners, this can be simple or complicated. For example, if there is a holdout who drives up the price of the stock, this could be an issue.

If you are purchasing a pharmacy, the attorneys at Brown & Fortunato, P.C. can help you throughout the entire process. Call us at (806) 345-6300 or Contact Us by email for more information about how we can help you and our Practice Areas. You can also visit us in person at 905 S. Fillmore St., Suite 400 in Amarillo, TX to learn more.