“Patience is a virtue”
In early 2019 we were instructed by a large multiple pharmacy group to sell one of its pharmacies in Carnforth, a small semi-rural town in north Lancashire. The Pharmacy Group Sale was difficult due to many mitigating factors.
Given the reasonably remote location, there was a limited pool of genuine purchasers interested in the business, so a longer than usual marketing period was required to ensure we had exhausted all possibilities for the sellers. This included entering into discussions with a nearby 100-hour pharmacy owner to explore a potential merger of the 40-hour contract into their 100-hour business. However, it was not possible to agree on terms between the parties, so that option fell away.
At the same time, a local pharmacist, Ben Fell, who was working as a pharmacy manager for Asda, had been involved in a protracted transaction to buy his first pharmacy elsewhere in the area. Unfortunately, after many months of trying to find a way through the problems associated with that purchase, it became apparent that the sale could not progress.
Ben was not registered with us as a purchaser but an existing PSC client pointed him in our direction to see whether we had any suitable businesses we could offer him given that his purchase had just fallen through.
After an initial discussion, it became apparent that the pharmacy in question might offer a perfect opportunity so Ben quickly analysed the figures and, after a short period of negotiation, an agreement was reached in October 2019 between the parties on an acceptable price to buy the business and the freehold property.
As the purchaser required funding for the transaction, the bank appointed specialist valuers to carry out a valuation of the business & property and the survey was arranged in the usual manner. Unfortunately, during the surveyor’s visit, one of the members of staff made passing reference to historical flooding in the basement. Given the potential problems this might cause in the future, the surveyor reported back that this should be investigated further.
As the basement had been sealed off for a long time, the owners had to arrange for part of the flooring to be taken up so contractors could access the space. On investigation, the basement was found to be totally dry. It seemed that any flooding that may have occurred historically had long been resolved.
Nevertheless, the mere mention of the word flooding meant the lenders were concerned about the fabric of the building and insisted that a full structural survey was carried out. This was arranged for January, some 3 months after the offer had initially been accepted.
Good news came back from the surveyors in terms of the structure, which they found to be totally sound. However, the bad news was that one of the members of staff mentioned to this new surveyor that one of the toilets had been ‘condemned’ as it was not being used, and the standing water created a risk of Legionnaires disease!
It was then necessary to call out the contractors again and arrange for the toilet and all pipework to be removed.
Due to the delays, the bank then decided that they could not keep the terms of their previous offer and wanted to increase the rate of interest on the loan. Given the potential additional cost of the loan, Ben decided he had no choice but to find another bank, and predictably, the new bank decided they wanted their own survey to be carried out!
Thankfully this survey went without a hitch, but the problems were not over……..
Shortly after the transaction was originally agreed, we had assisted Ben with an application to NHS England for the change of ownership (COO) to his company. This process started in November 2019. After the usual pedantic queries over the paperwork, the application was acknowledged by NHS England as being ready for processing in early December.
Three months later there had been no news regarding the application, so we started chasing NHS England, only to then find all pharmacy market entry work ceasing in March due to the Covid-19 pandemic! When this finally re-commenced at the beginning of June, we chased again only to be hit with a brick wall of silence.
At the same time, the new bank, who were also hit by Covid related delays, were taking their time to sign off the paperwork for the new loan and Ben had to make numerous calls to them to make sure his loan was not being pushed to the back of the queue.
Having already finished his job at Asda, in anticipation of taking over the Carnforth pharmacy, Ben was able to spend time using his network to pull a few strings locally and make some progress with the NHS England area team, getting his application finally approved in July, some 8 months after it was first submitted!
At a similar time, everything was finalised with the bank and the end was in sight. The property from the Pharmacy Group Sale was finally ready for occupancy on the 1st September 2020, almost 11 months after the offer was first accepted and on that date, Ben was finally handed the keys to his first pharmacy.
As Ben found, through his two years or so of trying to buy his first pharmacy, it can be a very long journey and sometimes a very stressful one. However, as he also discovered, almost any obstacle can be overcome with the right level of persistence and determination.
If you are embarking on this journey for the first time it’s important to accept there will be many challenges throughout the process and to be prepared for those.
Whilst it is essential to have the right advisors around to support you through with these potential issues, it’s equally important to have the right mindset and to persevere when things become difficult.
It’s also crucial for the agent handling the transaction to liaise with all relevant parties, keep everyone advised of issues and try to resolve them accordingly.
In this instance, our clients, the sellers, were obviously disappointed at the time this transaction took to complete. However, we kept them abreast of each and every twist and turn and assured them that Ben was doing everything he could to overcome the issues. The overriding advice we gave our client was to stick with the purchaser as we felt he was genuine, clearly wanted to purchase the business and eventually, the desired outcome was achieved for all parties.
Not all purchasers will come up against pandemics, flooding, and tropical diseases but there will always be problems that result in buyers or sellers questioning whether they want to see the process through to the end.
However, as Ben found, once the sale is complete and you own your first pharmacy all that will be quickly forgotten and it will have all been worthwhile!
