Pharmacy Acquisition Finance in Maine

By Brad MacLiver
Authorship and profile at Google


When a Main (ME) pharmacy is being sold, the pharmacy buyer will rarely pay cash for the acquisition, and even when cash is available, Maine pharmacy buyer strategies usually involve financing the transaction.

A typical acquisition takes about 6-9 months to complete, so the Maine pharmacy seller will need the buyer to provide some proof up front about their ability to close the transaction. Acquisitions involve several hours worth of due diligence and negotiation. This process, in addition to the buyer and seller, will involve attorneys, accountants, lenders, valuation companies, pharmacy industry specialists, pharmacy brokers, along with others. Nobody wants to pursue 6-9 months worth of work that involves a variety of highly paid professionals without having some confidence of the pharmacy buyer’s ability to close the deal.

The process begins with determining the value of the pharmacy. There are many companies that offer valuation services. However, due to the changing circumstances of the pharmacy industry in Maine, a pharmacy industry specialist should be used for valuing the company 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 funding pharmacy transactions will not accept a sellers “gut feeling” or a value based on a simple accounting formula. Lenders need to make a decision to finance a pharmacy based on sound and verifiable information.

There are a number of methods to finance a ME pharmacy acquisition. Each can be customized or included with other forms of financing to provide the buyer with the best financing package and the greatest chance for the businesses financial success.

Structuring the transaction is extremely important. The drug store seller of course wants as much money as possible and wants cash. However, the pharmacy buyer desires to spread out the debt service, wants to have as little cash as possible invested in the acquisition.

The Maine pharmacy industry is in a market where it is more difficult to obtain funding. For the acquisition to be financed a lender will need a strong understanding of the pharmacy industry and what, beyond the collateralized assets, the company offers to reduce the perceived risk.

One simple example of this is the Pharmacy Industry in ME. 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 typically will only provide $15-20,000 of collateral for a buyer 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.

When pursuing Pharmacy Acquisition Finance in Maine, for the best chance of success, make sure the pharmacy valuation company and the lender have expertise in the pharmacy industry.

Tips:

1. Attorneys and CPAs who have been representing the Maine pharmacy or drug store for many years may see the transaction as putting themselves in a position of losing a client when the business is sold. Make sure they are working diligently on the pharmacy transaction and are not slowing or undermining the process.

2. Since ME pharmacy acquisitions involve 6-9 months and sometimes a couple years, all parties involved need to be aware of time tables. Much too often, items of importance end up sitting on the desk of someone that is outside of the control of the buyer or seller.

3. All of the Maine pharmacy’s financial information needs to be current. Over the lengthy process the data supplied to both the buyer and the lender will need to be updated on a continuous basis. Things can change drastically during a nine month period and the pharmacy seller will need to continually prove the financial condition of the company.

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View our video about Pharmacy Acquisition Finance.

Learn more options for financing a pharmacy by visiting www.BuyingAndSellingPharmacies.com

Want to learn about how much your pharmacy is worth? It's free at www.PharmacyValuations.com.

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