If you are thinking of selling your pharmacy there are steps you can take to assist to maximise the sale price and facilitate a smooth transition to exchange of contracts and completion of the sale.
Firstly, as Neil Featherstone advised in his article (Is this the right time to sell? Retail Pharmacy May 2015), get your affairs in order. Make sure you have up-to-date financial reports, including profit and loss statements, tax returns and BAS. Ensure your dispensary trading reports are accurate and your point-of-sale reporting has no significant errors. Conduct rolling stocktakes so you can substantiate the value of inventory at any time.
Secondly, engage with your lawyers to ensure all relevant agreements are in place and up to date and they have everything they need to prepare the contract for the sale of your pharmacy.
Make sure your lawyers are experienced in dealing with pharmacy sales.
During this process of drafting the contract for sale of business questions that you may not yet have considered often arise. These include:
- Are there any supply contracts that will need to be assigned or terminated? If you have supply contracts currently in place, make sure you provide copies of these to your lawyers who can advise you on any restrictions on or requirements for assignment and/or any other issues.
- What warranties are being given? You should be careful in giving any warranties to prospective purchasers before talking to your lawyers. If you have given any warranties, you should let your lawyers know so they can include appropriate wording in the contract.
- Does the prospective purchaser wish to trade under your business name? If yes, then this name has to be assigned to the purchaser via ASIC and you should inform your lawyers about this as soon as possible as this process can take some time.
- Will there be a restraint period and/or distance? If so, for how long and for what distance? You must carefully consider whether you wish to trade or be employed nearby after selling your pharmacy business.
- How will the price be broken up between goodwill, fixtures and fittings? Which fixtures and fittings form part of the sale? You should provide your lawyer with a detailed list of fixtures, fittings and inventory included in the sale.
- In addition to goodwill, fixtures and fittings, have you considered what value should be put on stock before a stocktake is conducted?
- What about your lease? Have you recently renewed your lease or exercised an option? If so, has the new lease been signed and registered?
Your existing lease must be transferred to the new proprietor to relieve you of any obligations that may arise under the lease after you have sold your pharmacy business. This can give rise to difficulty and sometimes delay as a third party, being the landlord, with no financial interest in the transaction, will have to be involved and the prospective purchaser may not meet the requirements of the landlord. It is prudent that you provide a copy of your lease to your lawyers to ascertain the landlord’s requirements for assignment of the lease so that appropriate wording can be incorporated in the contract.
- Do you operate a franchised business? If so, you are about to involve a further party into your pharmacy sale, namely the franchisor. Your lawyers will need ascertain what the franchisor’s requirements are in respect of the assignment of the franchise to the prospective purchaser of your pharmacy. There may even be rights of pre emption or first and last refusal in the franchise agreement that need to be considered. There may also be a fee for consent to assignment.
As you can see there are many things you need to consider and it is thus important to involve your lawyers as soon as you consider selling your pharmacy business. Contact our Pharmacy Law Experts for further discussion.
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