Planning an Exit Strategy for Pharmacy Owners
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Transcript Planning an Exit Strategy for Pharmacy Owners
Pharmacy Owner’s Guide
To Exit Strategies
Presented by:
Guy W. Stillwell, R.Ph.
Pharmacy Consulting Associates, Inc.
PCA
www.pcapartners.com
Disclosures
Stock Holder: PCA-Pharmacy Consulting
Associates, Inc. / President
Program Outline
Market Trends
Preparing To Market
Your Pharmacy
Timing Considerations
Professional Resources
Market Valuation
Owner Financing/
Potential Buyers
Junior Partnership
The Selling Process
Market Trends
Is Independent Pharmacy Strong Again?
1985-1998 : Independent Pharmacy decreased by
8,000 units
1999-2005 : Independent Pharmacy decreased by
1,700 units
2004-2006 : Independent Pharmacy decreased by
900 units
2007-2009: Independent Pharmacy decreased by
770 units
The strength of Independent Ownership
Market Trends
Transfer of Ownership
Pharmacists are becoming more interested in
ownership.
Chain file buys are no longer your only
option.
Metro community pharmacy owners are
challenged by not having full access to
buyers.
Are smaller community pharmacies able to
attract young healthcare professionals?
Market Trends
Where are we today?
Independent Pharmacy Projections for 2010
Metro vs. Rural Trends
The Future
Pharmacy Market Values
Timing Considerations
The 5-10 Year Planning Process
Potential Buyers
Junior Partner
Key Employee
Lease Terms
Corporate Structure
C-Corp
S-Corp
Timing Considerations
The 3-5 Year Planning Process
Financial Metrics
Balance Sheet
P&L
Cash Flow
Market Valuation
Industry Valuation Metrics
Cash Flow Analysis
Buyer’s ROIC/ROCC
Obtain Expert Advice
Timing Considerations
The 3-5 Year Planning Process
Operational Factors Affecting Market Value
Private Charging
Unit Dose Packaging
Delivery Service
Niche Services
Compounding
DME
Specialty Pharmacy
Nursing Home
Timing Considerations
The One Year Planning Process
Market Valuation
Identify Buyers
Exception: JP Program needs to be
established 5-10 years prior to transfer date
Obtain Expert Advice
Accountant
Legal Counsel
Business Consultant specializing in Pharmacy
acquisitions and mergers (The buy/sell
process)
The Market Valuation
What is My Pharmacy Worth?
Industry Metrics
$/Rx plus Inventory
Multiple of Net Income
Range: $0-$30/Rx
Range: 0-5x Net Income
% of Sales plus Inventory
Range: 0%-40% of Total Sales
The Market Valuation
What is My Pharmacy Worth?
Why the Metrics Do Not Work
Ranges are Variable
Standard Metrics are Unreliable
Lack Specific Market and Pharmacy Data
How to Understand the Metric Values for
Your Pharmacy
Know the Market
Engage Expert Pharmacy Appraisal
Consultant
The Market Valuation
What is My Pharmacy Worth?
Buyer’s Perspective
Continuation of Business
Cash Flow
ROIC/ROCC
Financing
File Purchase
Retention
Operational Blending
ROIC
Potential Buyers
Identify all Buyers in the Market
Key Employees
Local Independents
Regional Independents
Independent Pharmacy Investors
Chain Pharmacies
Specialty Pharmacy Operations
Potential Buyers
Engaging All Your Buyer Resources
Explore all of your options
Strategically weigh the pros and cons
Independent
Chains
Preparing To Market Your Pharmacy
Protecting your Business and Maximizing Value
Confidentiality and Non-Disclosure
Agreements
Providing Documentation-The Presentation
Notification of Staff, Family, and Friends
Engage Expert Assistance
Professional Resources
Legal Counsel
Accountant
Limited Knowledge Regarding Pharmacies
Business Consultant
Expert on Pharmacy Valuation
Increases Potential Buyer Pool
Minimizes Your Worry – Manage Entire
Process
Maximizes Your Value – Expert Negotiations
The Selling Process
Critical Steps in Maximizing Your Value
Strategically Provide Documentation based
on Buyer’s Due Diligence
Only provide exactly what is requested
Obtain LOI prior to full disclosure
Understand Buyer’s operation, needs, and
expectations
Understand Buyer’s financial position
Does Buyer’s financial position facilitate sale
The Selling Process
Critical Steps in Maximizing Your Value
The Asset Purchase Agreement (APA)
Stock Sale vs. Asset Sale
Asset Allocation
“Going Concern” vs. “File Buy”
Lease Assignment or Restrictions
Prescription Retention Holdbacks
UCC (Liens) Filings
The Selling Process
Critical Steps in Maximizing Your Value
The Non-Compete Agreement
Determination of Restrictions
Term
Geographic Radius
Seller’s Plans
Determination of Value
Corporate Structure
Paid to Seller Personally
Tax Concerns
The Selling Process
Final Steps
Preparing for the Closing Date
Removal of Buyer’s Contingencies
Regulatory Notifications
BOP
DEA
Medicaid
Medicare
Inventory
Dating
Inventory Level
Owner Financing/Junior Partnership
Is Owner Financing for Me?
Owner Financing
Security Positions
Risks
Bank is always first
Personal Guarantees & Cross Collateral
Default
Benefits
Increases Potential Buyers
Possible Tax Benefits
Provides “Bridge Financing” to Bank Loans
Owner Financing/Junior Partnership
Is a Junior Partnership Right for Me?
Junior Partnership
Tax Advantages
Available Programs
Key Employee
Confidence
Trust
Ability
Questions and Answers
Additional Questions
Contact Information:
Guy Stillwell, R.Ph.
(651) 270-0038
or
[email protected]