So, you’ve put your pharmacy on the market, found a buyer and negotiated a sale price. Job done, right? Not quite… Although you have taken some important first steps, the transaction is far from complete and much of the hard work is still to come. Here are five tips to help make the period between sale and settlement as quick and stress-free as possible.
1. Understand the Process
Shortly after a sale has been reached, ask your broker to outline the entire sale to settlement process. Familiarise yourself with the various stages and the different stakeholders involved. Write a list of your responsibilities and when you will need to complete them.
These will include big tasks like complying with due diligence requests and relatively small tasks like notifying your POS provider about the sale. At AP Group, we pride ourselves on keeping our vendors informed and doing as much of the work for them as possible.
2. Be Prepared
Being ultra-organised and preparing ahead will reduce the chance of settlement delays. For example, even though stocktake won’t occur until the day before completion, you should engage a stocktake company and review their stocktake agreement at least three weeks in advance. You also need to make sure that your business and financial data is in order.
Most sales will be subject to a due diligence period that will allow the purchaser and their accountant to review the data with a fine-tooth comb. Be sure to check your reports before you forward them to the other side. If you notice something that may be cause for concern, flag it with your advisors so that you can review accordingly. Any inaccuracies in provided information, even if they are innocent mistakes, can seem suspicious.
Additionally, if the purchaser requires finance, the banks will need current financial reports to process their application, so make sure your books are current. Outdated financial information is a major cause of delay and the longer a deal drags on, the more chance it has of falling over.
3. Select the Right Team
You will probably have a broker in your corner by the time you have reached a sale. However, you will need to engage a solicitor to represent you in the drafting and execution of a formal Contract of Sale, lease assignment, pharmacy authority transfers and completion day.
Quality legal representation is paramount. This is not the time to go for the cheap option, as it will probably end up costing you in the long run. Make sure your solicitor has pharmacy experience. No matter how good they are, a lawyer with no pharmacy experience is immediately at a disadvantage when opposing a pharmacy-experienced lawyer, as they simply won’t be familiar with the unique commercial, legal and regulatory frameworks that govern the industry. Our AP Legal team is pharmacy-focused, and we offer a discounted flat-fee for our vendors.
4. Keep Communication Lines Open
Your broker and solicitor are employed to act on your behalf so make sure you are clear with your instructions and unafraid to voice concerns or ask for help. Also, they should be providing you with progress updates at least once a week. If you feel out of the loop, let them know and request more regular contact.
Equally, it is vital that you are easily contactable and responsive throughout the settlement process. Unexpected challenges arise in most settlements and if you cannot be easily reached at critical stages, timelines can blow out significantly.
5. Be Pragmatic
You will have agreed to price and other key terms already, but the settlement process does involve further negotiation with the purchaser when it comes to the Contract of Sale (COS). This is the binding document that formalises the terms of the transaction in detail. Because all communication is directed through the solicitors, the COS stage can be a protracted one even when there is no disagreement between the parties. When the parties are at loggerheads, it can push settlement back by weeks or even months. It can also cultivate resentment between vendor and purchaser, and, in rare cases, cause the deal to fall over completely.
Common sticking points with a COS are staff entitlements, restraint of trade and warranties. Quite often the clause being disputed is a relatively unimportant one, but neither side is willing to compromise. During such times it is important to keep a ‘big picture’ perspective. How important is that clause to you? Is it worth the stalemate? You are not obliged to concede on things that matter, but sometimes compromise is necessary to progress the deal. The most important thing is that you get to settlement at the right sale price.
Despite the best efforts of those involved, settlements can get delayed and, complicated. It can be a nuanced process that offers plenty of scope for unexpected dilemmas to emerge and relationships to become strained. Keeping the above tips in mind might not guarantee a problem-free settlement, but should help you reduce unnecessary wastage of time and money, and reduce stress.
– Robert Whelan, Managing Director at AP Group