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How can independents succeed when buying pharmacies from corporates?

Opportunities to expand are appearing regularly as corporates divest sites. How can independent pharmacies best capitalise on the opportunity?

Following a wave of divestments from corporates like Boots, Well Pharmacy and particularly Lloydspharmacy, which exited the high street last year after selling off all its 1,054 UK community pharmacies, entrepreneurial pharmacists across the country have seized the opportunity to make acquisitions and turn corporate struggle into independent success.

At RxBridge, we’ve been enabling pharmacy businesses to fund acquisitions for many years, whether they’re first-time buyers or experienced groups looking to expand. We’ve seen how independents can thrive where corporates have failed by being more agile and attuned to their customers’ changing needs.

With Rowlands set to be the next corporate disposing of branches, I caught up with two of my clients – both entrepreneurial pharmacists who have recently bought pharmacies from corporates – to find out what advice they have for independents looking to buy from a corporate. Vaibhav Chhatwal is the owner of Welcome Health Pharmacies Ltd. Since 2016, he has built up his group of nine pharmacies across the North East of England by making acquisitions from both independents and corporates. Further south, Ram Parimi owns four pharmacies in Hastings, East Sussex, and Waltham Abbey, Essex. He bought two from independents and two from a corporate.

1. Be persistent with corporate bureaucracy

There is no doubt that corporate acquisitions can deliver prime assets for your business, as long as you’re prepared to be persistent and invest extra time and energy in the process. The first thing that Vaibhav and Parimi both say, is that buying from corporates is harder work than dealing with independents, because you have to track down so many more people to get information. “If you ask a question,” Vaibhav says, “you will probably have to chase several people before you get an answer.” This can make the process pretty slow. “You don’t necessarily get a specific contact, so you have to speak to lots of people and repeat the same conversation many times,” Ram agrees.

2. Get accurate revenue figures before committing to anything

For Vaibhav, who has done a lot of negotiating with corporates in the eight years since he bought his first pharmacy, getting accurate income data is essential. “My advice for entrepreneurial pharmacists, especially first-time buyers, is to be thorough with your numbers,” he says. “The pharmacy’s revenue figures are the best basis for a valuation.”

Read more: Do corporate disposals offer an opportunity for independents?

Getting accurate, up-to-date figures is important because your lender needs to assess the value of the business you’re buying, before they can advance you any funds. “I always ask for NHS PPD statements before I take any action,” Vaibhav continues, “because they are a guarantee of the pharmacy’s income.” He has learned the hard way that some corporates can be vague when it comes to providing robust performance figures. After pulling out of one potential acquisition because the corporate would only send him spreadsheets instead of verified income statements, he advises buyers to be sceptical. "Unless you get those PPD statements, there’s no guarantee their numbers will stack up,” he cautions. “Ask for every bit of information you need, and if you don't get it, walk away.”

3. Check the lease carefully before you buy

Some of the thorniest issues that Vaibhav and Ram have overcome are not to do with the corporates directly, but dealing with leases and landlords. As Vaibhav says, “One thing that can trip up any pharmacist making an acquisition is the property side.” First-time buyers may not realise that they will have to negotiate the terms of a new lease separately with the landlord, which may not be straightforward.

When the prospective buyer goes to a traditional lender like a bank for a loan to buy the property, the bank will expect them to have a ten or fifteen-year lease in place first, but buyers don’t always consider this before paying a deposit. This is what happened to Ram, who paid a deposit to acquire two pharmacies from a corporate before learning that one lease only had a year-and-a-half left. “My bank wouldn’t lend me the money until I had a new 15-year lease, which was stressful,” he explains. “I had to do a lot of negotiating that delayed the sale by months. The landlord only signed the lease six days before we took over.”

Vaibhav, meanwhile, has also learned to scrutinise the lease before making any payments. After paying a deposit to buy one pharmacy, he was horrified to notice that the lease contained an obscure clause that prevented him from taking a loan to buy it. “I eventually got my deposit back,” he reveals, “but it was a tough learning curve. I’ve never made that mistake again.”

4. Ask the landlord about unpaid liabilities

It’s important to speak to the landlord of the property as soon as possible, before paying deposits or signing agreements, because corporates can leave behind unpaid bills that the landlord may ask you to pay. These issues aren’t a problem if you discover them early, because you can factor them into your negotiations, but don’t rely on the corporate to reveal them.

“Before I bought one pharmacy from a multiple,” Vaibhav recalls, “the landlord asked me to pay ten years’ worth of rent increases that the company hadn’t paid, adding up to £10,000, as well as unpaid water rates and maintenance bills! They hadn’t told me anything about this. I refused to pay, but it took some tough negotiating to resolve the issue."

5. Be cautious with distressed sales

Ram and Vaibhav’s experiences with difficult leases and unpaid liabilities highlight a wider issue that all entrepreneurial pharmacists should be aware of – be diligent when buying from corporates selling assets under distress. These divestments can offer huge growth opportunity for independents, but make sure you double and triple-check every detail and speak to the landlord before paying a deposit. A multiple that is selling off outlets in a hurry may be more motivated to make sales than to be completely transparent.

6. Research your local competition

The final tip comes from Ram, who has learned the importance of a perfect location. He scoured Southern England in 2023 before buying an independent pharmacy in Waltham Abbey, Essex, specifically because he knew he could outperform his only two local competitors – both owned by a corporate. A few months later, he was able to acquire these too, securing a prime growth opportunity and removing his competition at the same time.

As well as checking the target pharmacy’s proximity to local GPs and health centres, he advises any entrepreneurial pharmacist to check the local competition carefully, and particularly how many independent competitors there are. “It’s much tougher to compete with an independent operator than a corporate,” he advises. “Independents move faster. They know their customers better, and they work harder to keep them.”

A tip list for corporate acquisitions

This quick checklist summarises Vaibhav and Ram’s advice for buyers. This can help you identify issues and avoid potential pitfalls before buying from a corporate:

* When it comes to corporate bureaucracy, patience and persistence pays off

* Get accurate revenue figures straight away – PPD statements are the most reliable

* Ask to see the lease before you pay a deposit or agree a sale. Check the terms work for you and how long it has left – you may need a new lease to get funding

* Speak to the landlord before agreeing anything – check the rent has been paid up to date and there are no unpaid liabilities. You may inherit them otherwise

* Don’t rely on the corporate giving you complete information – check every detail

* Research your local competition – beware of too many independent competitors.

RxBridge is a natural choice for acquisition funding

I strongly believe RxBridge is uniquely positioned to help fund growth in the pharmacy sector, and we’re helping many clients right now to leverage their existing trade to fund their next acquisition and access the working capital they need to start a new business. Traditional lenders don’t understand pharmacy businesses or how to assess the value of a potential opportunity, so they can be slow and reluctant to offer enough funding. Pharmacy businesses are instead looking carefully at lenders like us, with an established pedigree in supporting entrepreneurial pharmacy owners to seize their moment.

With years of experience in the sector, we’ve designed a straightforward finance facility specifically for pharmacies, based on your NHS income. We can offer up to four times the value of your monthly income and make a fast, accurate risk assessment – so you get a lending decision within a matter of days, rather than the weeks or months you might have to wait with a bank.

When it comes to time-limited, competitive acquisition opportunities, businesses don’t have the time to spend on a long, complicated application process and then wait for a decision that, even if successful, may not align with their target completion date. Unlike a loan from a bank, our flexible, revolving line of credit is discretionary, has no fixed repayments and gives you the freedom to only draw down the finance you need, when you need it, then make repayments when the time is right for you.

As market leading pharmacy specialists providing revenue finance to almost 700 pharmacy businesses in the UK, that’s where RxBridge can help.

Clare Briggs is Sales Director at RxBridge

Get in touch today to find out more.

If you’d like to talk to pharmacy finance experts about an acquisition, contact RxBridge now on [email protected] or call +44 207 313 8088 and find out how we can help you achieve your ambition





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