Funding a Pharmacy acquisition

Funding a pharmacy acquisition requires meticulous planning in order to ensure you’re able to commit to the buying process. Breaking down each fee that is required will make the acquisition go much smoother without any surprises along the way.

First steps

Figuring out what kind of purchase you want will inform how you can finance your acquisition. There are two main options for acquiring a business. These are:-

• Asset purchase It’s possible to acquire the trade and certain assets of a business. This means that whilst you’ll own items such as equipment, fixtures, property and goodwill you will need to form your own business entity, so you need to be aware that you’ll need your own contacts, leases and loans.
• Share purchase Alternatively you can go for a share purchase. This means there would typically be an amount paid on day 1 for goodwill, fixed assets and estimated net assets then a payment made circa three months later based on completion accounts.

The price checklist

Once you know which kind of purchase you’re going for, it’s time to crunch the numbers. What will be included in the acquisition costs?

The first price, of course, is the asking price of the pharmacy, as well as the price for stock (paid upon completion of the purchase) and funding the cash flow of the business. Business expenses are a necessary cost to cover before purchasing a pharmacy, especially if you’re going for an asset purchase. Be sure to factor in the delay in NHS income too.

Stamp duty will also need to be considered if you’re planning on buying shares. Whatever you pay for the company’s shares, 0.5% of that will need to be paid for stamp duty.

It’s also important not to forget to have a contingency plan in place and include funding for that. It’s better to be safe than sorry and especially important if you’re a first time buyer to have backup funds.

Finally, the accountants, solicitors and lenders fees are all imperative costs to include when tallying up how much you’ll need to continue with the buying process.

Options for funding

Bank Loan

There are a number of high street banks that have specialist healthcare teams and an appetite to lend to this sector. However, after pricing up what you would need, you will most likely be asked for potentially between 20%- 30% of the cost upfront in order to secure loan funding – regardless of being a first time buyer or not. You need to ensure all your plans for the business are strong, stating how the pharmacy will make enough profit to repay the loan with factors such as its location, strength against the competition and it’s relationships with local general practices and other healthcare businesses.

It’s important to summarise exactly what the bank loan will cover, and what you’ll need to find additional funding for. This is where you’ll find if you can afford the pharmacy business you’re looking at, or can help support your search once you know the budget you can realistically afford with all final costs (including loans) put in place.

Funding the deposit

To fund the deposit, you will most likely need to offer the bank some kind of security. It is possible to look at personal assets as a form of security, including cash savings and other assets such as your home. The majority of the deposit could be funded by securing the deposit against your home. However, before doing this, you need to ensure that your business will have a good turnover and is incredibly unlikely to fail.

Still thinking about buying a pharmacy business?

The cornerstone of any good business purchase will always be thorough planning and sound business advice. Find a pharmacy or a few that you believe will give you a good Return on investment, and then ensure you go through a checklist with the bank with what you can afford and how you’ll pay it off. Compare funding from any schemes from other high street banks or lenders who specialise in the sector and, if you really believe the business is highly likely to make enough profit, consider putting your personal assets down as extra security. Just ensure you calculate costs and risks, and as always, plan, plan and plan some more.

If you need help buying a business or selling a business, Haines Watts will help you every step of the way. Get in touch to find out more.