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Things to consider if you are selling your pharmacy
Whether you are selling a pharmacy for the first time or making some changes to your existing portfolio Agata Rumbelow, Senior Solicitor specialising in Company & Commercial law, suggests three key considerations before you progress.
1. NHS England and Change of Ownership Consent – will this be required?
The answer to this question depends on how you are looking to sell your pharmacy. If it is to be sold by way of a share sale then consent to the sale will not be required because essentially the buyer will step into your shoes as shareholder of the company from which you operate your pharmacy business and therefore the status quo of the pharmacy will remain largely the same. However, if you are looking to sell by way of an asset sale then change of ownership consent will be necessary prior to the sale. Your accountant, you and the buyer will be best placed to determine whether the sale should be by way of a share sale or asset sale, taking into account tax considerations and operational practicalities.
2. Selling your pharmacy by way of an asset sale
As with any asset sale, consideration needs to be given as to the terms of sale, as well as what information the buyer will require about the business – this process is known as due diligence. It is advisable to set out the main terms of sale in a document known as Heads of Terms so that parties know from the outset what they are selling or buying and if there are any misunderstandings then they can be discussed/negotiated at the outset instead of far way down the line when legal and other advisory costs have been incurred. The terms of sale will be reflected in the asset sale and purchase agreement negotiated on your behalf by your solicitor.
In agreeing the Heads of Terms, you and the buyer should consider the following non-exhaustive list:
- Whether you are to grant the buyer an exclusivity period.
- Deadlines for exchange and completion.
- The level of due diligence to be undertaken by the buyer, subject to a non-disclosure agreement.
- Any other conditions (other than change of control consent).
- Warranty limitations – warranties are statements of fact about the business that you will give to the buyer. If proved untrue, it may allow the buyer to sue for breach if a loss can be established. As the seller, you may be able to protect your position by limiting the length of time in which the buyer can bring a warranty claim and by putting a cap on the monetary amount the buyer can sue for.
- Any non-compete restrictions.
Specific to pharmacy asset sales, an application will need to be submitted by you and the buyer for consent to change to NHS England sooner rather than later in the sale process. This is advisable, because consent is at the hands of NHS England and may take some time to obtain. However, before submitting an application you, as the seller, should ensure that you have the legal comfort that the buyer will not walk away from the purchase, because once an application is submitted for change of ownership consent it is the buyer who then has control of the application. We would usually advise that parties proceed to legal exchange with completion of the purchase to take place automatically once the buyer has the change of ownership consent. This gives you contractual protection that the buyer will have to proceed to completion provided that consent is granted. Completion would occur on the same day as NHS England update their Pharmaceutical List and at this point the buyer will have acquired the business and become responsible for all obligations of the pharmacy under the terms of the NHS Contract.
3. Selling your pharmacy by way of a share sale
The same considerations need to be given on a share sale as an asset sale as highlighted above. However, change of control consent from NHS England will not be necessary for the reasons set out above. This can mean that the transaction process can may happen is a shorter time frame.
If you need advice or assistance to buy or sell a pharmacy please contact Agata Rumbelow.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.