When it comes to buying or selling a pharmacy, the settlement process is a pivotal final stage where all the legal, financial, and operational aspects come together. For those unfamiliar with it, settlement is the period between signing the contract and officially transferring ownership. It’s a time of detailed checks and tasks that must be completed to ensure a smooth transition of the business.
Navigating this complex process can be challenging for both purchasers and vendors. It involves key professionals, such as solicitors, accountants, and finance brokers, working in sync to meet tight deadlines. A well-managed settlement ensures that the business is legally and financially transferred without issues—crucial for new owners ready to start trading and outgoing owners looking for a clean handover.
In this article, our Settlements Manager, Aaron Whelan, shares expert tips to help both buyers and sellers handle the pharmacy settlement process efficiently and minimise stress. We have come up with the key tips below that will guide you through the process, ensuring all critical tasks are completed for a smooth settlement process.
For Purchasers
1. Select the Right Advisors
Choosing the right team of advisors is critical to ensure a smooth and timely settlement. Key professionals include:
- Solicitor: Your solicitor will handle the due diligence process, the preparation or negotiation of the sale contract, and applications to the PBS and State Authorities. It is essential that your solicitor has specific experience in pharmacy transactions, as these involve unique legal and regulatory requirements. A solicitor unfamiliar with pharmacy sales may overlook critical details, which could lead to settlement delays or complications. We have a legal team at AP Group so feel free to reach out if you need a solicitor for your pharmacy purchase.
- Accountant: An accountant will oversee the financial aspects of the purchase, including potentially setting up a business entity and ensuring the correct handling of tax matters. Choosing an accountant with pharmacy expertise is crucial because pharmacy businesses have specific financial structures, tax implications, and financial reporting standards. A pharmacy-experienced accountant can provide accurate advice on cash flow management, tax minimisation strategies, and industry-specific financial benchmarking, ensuring you get off to a strong financial start. We work with a range of trusted accountants so please feel free to reach out if you would like us to recommend one to you.
- Finance Broker: A finance broker will assist in securing the necessary funding. It’s important to consult with them before submitting an offer, as they can assess your borrowing capacity. Pharmacy businesses often involve complex funding requirements, so selecting a broker with experience in pharmacy finance is vital. They understand the specific valuation and risk assessment models used by lenders in the industry and can help avoid complications related to pharmacy-specific finance clauses that general brokers may not anticipate. Get in touch if you would like one of our Finance team to assist you with calculating your borrowing capacity or any other advice on funding a pharmacy purchase.
These advisors should work together harmoniously, with clear communication being a priority. Remember, they are working for you, so ensure they are progressing tasks in a timely manner.
2. Consider the Handover Tasks
It will be important in the early stages of the transaction to consider the handover tasks such as:
- Wholesaler: Setting up your wholesale account of choice. This may be the same as the current vendor or one of your preference.
- Point of Sale (POS): Consider which point of sale system you will be using within the business for retail and or prescriptions. Again, you may elect to use the current vendors system, in which case you may need to investigate transfer of licenses.
- Phone & Internet: Something that many might forget to include in their handover. In most cases purchasers will transfer the current service the vendor has into their own name. However, it’s something to be on top of before settlement day.
- EFTPOS & Bank Accounts: You can’t trade without these, so making sure you have these two items setup and ready to go for settlement day.
For Vendors
1. Have the Right Advisors on Your Side
As a vendor, having a reliable team is equally important to ensure everything proceeds smoothly. Your core team should include:
- Broker: A broker will not only help secure the best price for your pharmacy but will also assist both parties throughout the settlement process. It’s essential to work with a broker who has extensive experience in pharmacy sales. Pharmacy businesses have unique valuation considerations, such as dispensary income, PBS-related factors, and specific buyer expectations. A pharmacy-experienced broker understands these nuances and can negotiate effectively, ensuring you achieve the best possible outcome while managing critical details like lease terms that may affect the transaction.
- Solicitor: Your solicitor will draft the contract of sale and represent your best interests during negotiations with the purchaser. It’s vital that your solicitor specialises in pharmacy transactions, as pharmacy sales involve industry-specific legal requirements, such as PBS approvals and relevant health department regulations. A general solicitor may not be familiar with these intricacies, which could lead to delays or errors that jeopardise the sale. Pharmacy is one of the areas that the AP Group Legal team specialise in so feel free to reach out if you would like some advice to guide you through the sale.
- Accountant: It’s important to work with your accountant to ensure the financial aspects of the sale are handled correctly, particularly for tax purposes. A pharmacy-experienced accountant is crucial in this process, as they understand the specific tax implications of selling a pharmacy, including GST on the sale, and capital gains tax calculations. They can help you structure the transaction to minimise your tax liability and ensure that all financial reporting is accurate and in line with industry standards. We work with a range of trusted accountants so please feel free to reach out if you would like us to recommend one to you.
2. Keep Key Transaction Details Ready
Ensure you have all necessary documents and information ready well in advance, such as your lease agreement, point of sale (POS) reports, wholesaler account details, and any other relevant paperwork. Staying organised and sharing these details with your advisors early on will help prevent delays and keep the settlement process on track.
In Summary
If you are purchasing or selling, consider doing it through a business broker. For example, at AP Group you will be provided with access to a selling agent and a dedicated settlement manager. This team will give you and your advisors a settlement timeline, detailing key milestones to keep the process on track and ensure the settlement is completed on time.
Whether you are the purchaser or the vendor, having the right team of professionals in place is essential for a smooth pharmacy settlement. Good communication, organisation, and timely action are the key elements that will make your transaction efficient and stress-free.
At AP Group, we pride ourselves on the comprehensive support we provide to ensure that your pharmacy transaction is managed seamlessly, so please get in touch if there’s anything our team can help you with.
Written by Aaron Whelan, Settlements Manager – AP Group
AP Group are the leading pharmacy experts in Australia and specialise in helping first time buyers find the right pharmacy and secure the finance to support their purchase.
We connect existing owners with over 5000 ready and eager investors via our cutting-edge online Data Room. Our Data Room keeps confidential listing data secure and allows buyers to make informed decisions on each of our pharmacies for sale.
AP Group have built connections with all the major banks and a host of smaller lenders, ensuring that first time pharmacy buyers find a better deal.
About the Author:
Aaron was voted the nicest guy in the office! He is the team PT and encourages us all to get out and exercise at lunch time. With a career that’s seen him coaching at Australia’s top swimming club and swimming through the tech-savvy waters of Apple, Aaron brings a unique blend of precision and efficiency to our team.
He’s our go-to guru for all things during a settlement process and is seriously good at making sure milestones are being achieved and projects are delivered on time.
Aaron has a knack for building relationships that outlast the latest iPhone, and he’s all about optimising operations with the meticulousness of an architect planning his next masterpiece.
Not only does Aaron hold a degree from RMIT, but he’s also had the honour of learning from the big shots in the pharmacy world.
Outside of his professional prowess, Aaron’s a fanatical admirer of architecture, a fitness fanatic, and a sports enthusiast. Whether he’s diving into swimming, racing through Formula 1 stats, or tackling the NFL, he’s always in the game. Plus, he’s got an eye on the ever-changing world of tech – the gadgets and gizmos that make the future look pretty darn cool.