Tips for Pharmacy Acquisition Finance in Nevada
Tips for Pharmacy Acquisition Finance in Nevada
Typical acquisitions take 6-9 months to complete, so the pharmacy seller will need the buyer to provide some proof up front about their ability to close the transaction. Acquisitions will involve many hours of due diligence and negotiation, so the process should involve qualified parties.
Along with the buyer and seller in Nevada, the acquisition will involve attorneys, accountants, lenders, valuation companies, industry specialists, along with others. No one wants to pursue 6-9 months of work involving a variety of highly paid professionals without having some confidence of the pharmacy buyer's ability to close the deal.
The process will begin with determining the value of the business. There are many companies that offer valuation services. However, pharmacies are not ice cream stores. There are many aspects of valuing a pharmacy that are unique to the industry, so generic valuations or simple accounting formulas should not be used. An industry specialist should be used for valuing the pharmacies instead of a valuation company that has a broader spectrum.
In order to complete a valuation the selling company in Nevada needs to provide up-to-date data. Lenders will not accept old data, or a sellers "gut feeling." Lenders need to make a decision to finance based on sound and verifiable information.
Structuring the transaction is extremely important. The seller of course wants as much money as possible and wants cash. The buyer needs to spread out the debt service and wants to have as little cash as possible invested in the acquisition.
Nevada pharmacies and drug stores are in an industry where it is more difficult to obtain business loan due to the majority of the value in a pharmacy is the customer files and not hard assets. Therefore, for the acquisition to be financed a lender will need a strong understanding of the industry and what, beyond the collateralized assets, the company offers to reduce the perceived risk.
Pharmacies have typically been known for generating profits and to be stable businesses. However, they are usually in leased locations, and their furniture, fixtures, and computers will only provide $15-20,000 of collateral for a buyer possibly requesting a million dollar loan. A lot of money is tied up in inventory, but the small pills are considered by a lender to easy to move out the door in the event of default. Due to these circumstances many lenders will not loan money to these traditional money making businesses. A successful transaction takes a lender that understands the pharmacy industry.
Here are more tips for pharmacy acquisition and finance in Nevada:
1. Attorneys and CPAs that have represented the pharmacy seller in Nevada for several years might see the transaction as something which puts themselves in a position to lose a client when the business is sold. Ensure that they are not undermining or slowing down the process and working diligently on the transaction.
2. Because it takes 6-9 months worth of work to complete a pharmacy acquisition, all parties involved should use time tables. Far too often, important items will end up sitting on the desk of somebody who is outside the control of both the buyer and seller.
3. It is crucial that all financial information be current. Over the transaction's lengthy process, data provided to both the buyer and lender must be updated on a continual basis. The situation can drastically change during a nine-month period, so the pharmacy seller in Nevada will need to prove the financial condition of their company continually.
For the best chance of success when one is pursuing "pharmacy acquisition finance" in Nevada, ensure that you are using a valuation company and lender with expertise in the pharmacy industry. Use a company that has the pharmacy experience and expertise who are direct correspondents with lenders who understand pharmacy.
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Resource Box
Contact www.WashburnAndAssociates.com to learn more about pharmacy finance, Rx valuations, pharmacy acquisitions, and various other forms of pharmacy finance in Nevada.
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