By Brad MacLiver
Authorship and profile at Google
When a MD pharmacy or drug store is being sold, seldom does the buyer pay “out of pocket” cash for the acquisition. Even when cash is available, pharmacy acquisition strategies usually involve financing the transaction.
Typical acquisitions take 6-9 months to complete, so theMaryland
Along with the buyer and seller the acquisition will involve attorneys, accountants, lenders, valuation companies, industry specialists, along with others. No one wants to pursue 6-9 months of work involving a variety of highly paid professionals without having some confidence of the pharmacy buyer’s ability to close the deal.
The process will begin with determining the value of the business. There are many companies that offer valuation services. However, pharmacies are not ice cream stores. There are many aspects of valuing a pharmacy in MD that are unique to the industry, so generic valuations or simple accounting formulas should not be used. An industry specialist should be used for valuing the pharmacies instead of a valuation company that has a broader spectrum.
In order to complete a valuation the selling company needs to provide up-to-date data. Lenders will not accept old data, or a sellers “gut feeling.” Lenders need to make a decision to finance based on sound and verifiable information.
Structuring the transaction is extremely important. The seller of course wants as much money as possible and wants cash. The buyer needs to spread out the debt service and wants to have as little cash as possible invested in the acquisition.
Pharmacies in MD and drug stores are in an industry where it is more difficult to obtain business loan due to the majority of the value in a pharmacy is the customer files and not hard assets. Therefore, for the acquisition to be financed a lender will need a strong understanding of the industry and what, beyond the collateralized assets, the company offers to reduce the perceived risk.
Maryland Pharmacies have typically been known for generating profits and to be stable businesses. However, they are usually in leased locations, and their furniture, fixtures, and computers will only provide $15-20,000 of collateral for a buyer possibly requesting a million dollar loan. A lot of money is tied up in inventory, but the small pills are considered by a lender to easy to move out the door in the event of default. Due to these circumstances many lenders will not loan money to these traditional money making businesses. A successful transaction takes a lender that understands the pharmacy industry.
Advice regarding MD pharmacy acquisitions and finance:
1. Attorneys and CPAs who have been representing theMaryland
2. Since pharmacy acquisitions in MD take roughly 6-9 months of work to complete, each party involved should follow a time table because items of importance will much too often end up sitting on the desk of someone that is outside of the control of the buyer or seller.
3. It is essential that all financial information be current. Data supplied to both the buyer and the lender will need to be updated on a continuous basis over the lengthy process. In the course of a nine month period, things can change drastically, which means theMaryland
For the best odds of success when pursuing “pharmacy acquisition finance,” make sure the valuation company and the lender have expertise in that industry. Choose a company that has the MD pharmacy experience and expertise, and is a direct correspondent with lenders who understand pharmacy.
************************
Authorship and profile at Google
When a MD pharmacy or drug store is being sold, seldom does the buyer pay “out of pocket” cash for the acquisition. Even when cash is available, pharmacy acquisition strategies usually involve financing the transaction.
Typical acquisitions take 6-9 months to complete, so the
Along with the buyer and seller the acquisition will involve attorneys, accountants, lenders, valuation companies, industry specialists, along with others. No one wants to pursue 6-9 months of work involving a variety of highly paid professionals without having some confidence of the pharmacy buyer’s ability to close the deal.
The process will begin with determining the value of the business. There are many companies that offer valuation services. However, pharmacies are not ice cream stores. There are many aspects of valuing a pharmacy in MD that are unique to the industry, so generic valuations or simple accounting formulas should not be used. An industry specialist should be used for valuing the pharmacies instead of a valuation company that has a broader spectrum.
In order to complete a valuation the selling company needs to provide up-to-date data. Lenders will not accept old data, or a sellers “gut feeling.” Lenders need to make a decision to finance based on sound and verifiable information.
Structuring the transaction is extremely important. The seller of course wants as much money as possible and wants cash. The buyer needs to spread out the debt service and wants to have as little cash as possible invested in the acquisition.
Pharmacies in MD and drug stores are in an industry where it is more difficult to obtain business loan due to the majority of the value in a pharmacy is the customer files and not hard assets. Therefore, for the acquisition to be financed a lender will need a strong understanding of the industry and what, beyond the collateralized assets, the company offers to reduce the perceived risk.
Maryland Pharmacies have typically been known for generating profits and to be stable businesses. However, they are usually in leased locations, and their furniture, fixtures, and computers will only provide $15-20,000 of collateral for a buyer possibly requesting a million dollar loan. A lot of money is tied up in inventory, but the small pills are considered by a lender to easy to move out the door in the event of default. Due to these circumstances many lenders will not loan money to these traditional money making businesses. A successful transaction takes a lender that understands the pharmacy industry.
Advice regarding MD pharmacy acquisitions and finance:
1. Attorneys and CPAs who have been representing the
2. Since pharmacy acquisitions in MD take roughly 6-9 months of work to complete, each party involved should follow a time table because items of importance will much too often end up sitting on the desk of someone that is outside of the control of the buyer or seller.
3. It is essential that all financial information be current. Data supplied to both the buyer and the lender will need to be updated on a continuous basis over the lengthy process. In the course of a nine month period, things can change drastically, which means the
For the best odds of success when pursuing “pharmacy acquisition finance,” make sure the valuation company and the lender have expertise in that industry. Choose a company that has the MD pharmacy experience and expertise, and is a direct correspondent with lenders who understand pharmacy.
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