Buying or Selling a Pharmacy in Canada

What You Should Know Before Embarking on a Business Deal

Buying a pharmacy or selling an existing business can be an exciting prospect that opens up many other career and financial opportunities. However, whether you are a buyer or seller, pharmacy transactions should be cautiously undertaken with the guidance of a core group of advisors. It is critical to consult with a knowledgeable lawyer in conjunction with your financial advisor and accountant at every stage of the process to mitigate your risks and improve the chances of bringing the sale to a successful conclusion.

The legal team at MÉDICALOI not only has extensive experience in helping prospective pharmacy buyers and sellers achieve their goals, but we also have access to a carefully curated system of professionals who may be called upon for their expertise. From the beginning phases of the transaction through closing and beyond, we can provide tailored legal services to help you make beneficial business decisions that can position you for future success.

What Are the Challenges Inherent in Purchasing or Selling a Pharmacy?

Making the decision to buy or sell a pharmacy is the initial step in the process. Bringing your plans to fruition requires calculated actions and diligent guidance from your financial and legal team. While many potential issues can arise before the transaction is completed, some of the early difficulties you may face include:

• Small market: The pharmaceutical industry in Canada is heavily regulated by the government, which can create barriers to entry for new pharmacies and limit their ability to exist. Consequently, while the country’s pharmaceutical industry is robust, the number of existing pharmacies is relatively small. Finding a pharmacy business to purchase that aligns with your professional goals, financial resources, and other prerequisites often involves significant research and preparation.
• Limited potential buyers: For individuals wishing to sell a pharmacy, finding a suitable buyer for your business may take time and effort. Patience can be key to receiving a fair price for the enterprise you worked so hard to build. You may be able to sell in-house to a pharmacist, but most owners will need to rely on targeted real estate marketing to attract a buyer.
• Valuation disagreements: An independent valuation from a certified evaluator is crucial in establishing the market value of a pharmacy. However, many different calculations may be used. Valuation disagreements are common, but entrusting price negotiations to an experienced legal representative is essential to reach the best possible outcome.

How Can Careful Planning With an Experienced Lawyer Help You Overcome These Difficulties?

Adequate preparation is an integral part of buying or selling a pharmacy. What occurs before the negotiations begin is often just as important to the transaction’s outcome. Our experienced lawyers can help you prepare for the process through the following steps:

• Creating a solid acquisition or sale plan: Your legal advisor from MÉDICALOI will consult with you to determine your professional needs and ambitions. We can then help you develop a detailed and flexible business plan for meeting your goals. Beginning the process well before you intend to make the transaction allows you to build a solid foundation that can inform and guide your decisions.
• Considering the purchase structure: As a seller, you must determine whether you will sell the pharmacy’s assets or sell shares of your corporation. Pros and cons, including tax considerations, exist for either form of sale. Your lawyer can advise you on the best structure for your situation.
• Developing a realistic transaction timeline: Transferring ownership of a business takes time. If you are an owner selling your independent pharmacy, it is crucial to have a clear exit plan that does not rush the closing process and allows a smooth transition from one party to the next. A buyer should budget adequate time to obtain financing, complete the due diligence process, and finalize the acquisition.

What Factors May Impact the Value of a Pharmacy?

A comprehensive evaluation of market dynamics, regulatory framework, competitive landscape, and operational aspects is vital when considering the purchase of a pharmacy in Canada. Different methodologies exist for calculating a fair price, which may involve annual sales and scripts, inventory, cost per script, and/or net operating income. To verify the overall financial viability of the operation, you, your lawyer, and your accounting team will need to closely examine the provided documents, including the pharmacy’s corporate minute book, financial statements, corporate tax returns, lease agreements, and other applicable contracts.

Performing due diligence is crucial to fully understanding the business’s health and prospects and avoiding costly future surprises. Negative issues that could be a red flag for potential buyers include a history of regulatory violations, wide-ranging company liabilities, and non-compliance with government agencies, such as the Workers’ Compensation Board. If there is no plan for correcting these issues before the sale, they could devalue the business or derail a sale altogether.

An established pharmacy may also have certain positive intangibles that may not appear in tax returns or financial information but can play a significant role in the business’s success. Your lawyer can help you familiarize yourself with all other aspects of the pharmacy’s operations that may affect its value, including:

• Geographic location
• Reputation
• Retained employees
• Up-to-date technology and software
• Loyal customer base
• Strong working relationships with local doctors and clinics

How Can Our Law Firm Assist You?

MÉDICALOI can help pharmacists navigate all aspects of the sale and acquisition process. From drafting a Letter of Intent to handling post-closing considerations, we can provide the honest and straightforward legal advice necessary to help you transition to the next stage of your career. Pharmaceutical industry regulations are complex and rigid, but our experienced lawyers can deftly manage the technical legal details of your business deal so you can focus on the day-to-day responsibilities of your operation. If you are considering buying or selling your Canadian pharmacy business, contact our law firm today at 438-805-5515 for a personalized case evaluation.