By Richard Buono, partner, Blacks Solicitors 

The pharmacy market is huge, with over 11,000 community pharmacies in England dispensing a staggering 1.08 billion prescriptions annually. With the prospects for growth afforded by an ageing population and innovation in the sector, the idea of owning a pharmacy business is undeniably compelling.

However, before delving into this potentially lucrative venture, it’s crucial to understand the significant factors when buying a pharmacy.

Richard Buono, a partner in the corporate law team at Blacks Solicitors, shares his insights into what pharmacy owners and potential owners need to be aware of when it comes to buying a pharmacy business.

Location

The first step to a successful pharmacy is evaluating the location. Consider the footfall potential that the location offers. Is the pharmacy near a GP surgery or otherwise in a busy area positioned to attract customers? A good location can make all the difference in generating strong sales.

Competition

Figure out the competitive landscape by assessing what is offered by other pharmacies in the vicinity. Identifying any gaps in service provision in the local area can be key to attracting new customers and making your pharmacy stand out in the market. Discovering this information can help new or potential pharmacy owners spot ways to make their business unique.

Is the seller proposing that you buy the assets of the business or shares? It’s advisable to secure legal advice on the method of business purchase, to help ascertain which is the most appropriate for your needs and situation. Consider, for instance, that a seller might lean towards selling shares in the business, often motivated by tax considerations.

However, it’s crucial to recognise that this approach carries elevated risks for the buyer and involves higher legal costs for both parties when compared to an asset purchase. Engaging in a thorough exploration of these nuances with legal expertise ensures a well informed decision tailored to the intricacies of your individual situation.

Deposit

Avoid paying a deposit until you have meticulously conducted due diligence on the business and are fully prepared to proceed with the contract exchange. The rationale behind this approach lies in the potential risk associated with paying a deposit too early.

Should your funding encounter unforeseen obstacles or if you subsequently uncover critical aspects of the business or premises that diminish the attractiveness of the acquisition, you run the considerable risk of forfeiting the deposit. By adopting a cautious stance and withholding your deposit payment until completion of due diligence and exchange of contracts, you safeguard yourself from a potentially big financial setback if the transaction for any reason cannot proceed.

Approval Processes

Submitting change of ownership and, if necessary, fitness to practice applications well in advance is essential, as approval timescales associated with this process need to be taken into account.

Adopting a proactive approach in this regard will ensure a smoother transition and minimise the issue as a potential obstacle.

Lease Dynamics

In the event that the pharmacy premises operate under a leasehold arrangement and you are seeking bank funding, it is highly probable that the financial institution will mandate a minimum lease term of 15 years, or at the very least that the remaining lease term exceeds the duration of the loan.

Consequently, it is imperative to review how much of the seller’s lease term is left. Should the remaining term prove inadequate, be proactive in initiating negotiations for a new lease with the landlord.

This will ensure that you meet the lender’s relevant funding requirements and that your premises location is sufficiently secure into the future to provide a good return on your investment of time and money.

Dispensing Base

Another key point to consider before purchasing is the pharmacy’s dispensing history. This information provides a strong indication of the financial prospects of the business and provides the foundation for you to build upon for future success.

Finally, when you’re looking to buy a pharmacy business, it is advisable to instruct a solicitor with plenty of specialist knowledge and experience to ensure the process runs smoothly and completes successfully.

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