Pharmacy Owners Guide To Exit Strategies Presented by: Guy W. Stillwell, R.Ph. Pharmacy Consulting...
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Transcript of Pharmacy Owners Guide To Exit Strategies Presented by: Guy W. Stillwell, R.Ph. Pharmacy Consulting...
Pharmacy Owner’s Guide To Exit Strategies
Presented by:
Guy W. Stillwell, R.Ph.Pharmacy Consulting Associates, Inc.
PCAwww.pcapartners.com
Disclosures
Stock Holder: PCA-Pharmacy Consulting Associates, Inc. / President
Program Outline
Market Trends
Timing Considerations
Market Valuation
Potential Buyers
Preparing To Market Your Pharmacy
Professional Resources
Owner Financing/ Junior Partnership
The Selling Process
Market TrendsIs 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 TrendsTransfer 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 TrendsWhere are we today?
Independent Pharmacy Projections for 2010
Metro vs. Rural Trends
The Future Pharmacy Market Values
Timing ConsiderationsThe 5-10 Year Planning Process
Potential Buyers Junior Partner Key Employee
Lease Terms Corporate Structure
C-Corp S-Corp
Timing ConsiderationsThe 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 ConsiderationsThe 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 ConsiderationsThe 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
Range: $0-$30/Rx Multiple of Net Income
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 BuyersIdentify all Buyers in the Market
Key Employees Local Independents Regional Independents Independent Pharmacy Investors Chain Pharmacies Specialty Pharmacy Operations
Potential BuyersEngaging All Your Buyer Resources
Explore all of your options
Strategically weigh the pros and cons Independent
Chains
Preparing To Market Your PharmacyProtecting 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 ProcessCritical 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 ProcessCritical 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 ProcessCritical 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 ProcessFinal Steps
Preparing for the Closing Date Removal of Buyer’s Contingencies Regulatory Notifications
BOP DEA Medicaid Medicare
Inventory Dating Inventory Level
Owner Financing/Junior PartnershipIs Owner Financing for Me?
Owner Financing Security Positions
Bank is always first Personal Guarantees & Cross Collateral
Risks Default
Benefits Increases Potential Buyers Possible Tax Benefits Provides “Bridge Financing” to Bank Loans
Owner Financing/Junior PartnershipIs 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