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Success Stories
Pharmacy sale and ownership transfer Success Stories.
Every ownership transfer of an independent pharmacy is unique, depending on the terms of the deal, the relationship between the owner and seller, the competitive environment, and so forth. The unlimited possibilities can be both liberating and intimidating. It's liberating to know that there are multiple ways to approach ownership, but also intimidating that there are so many possibilities to consider.
To help understand some of the more common ownership transfer models and potentially expand your creative thinking on how to buy/sell a pharmacy, we've collected success stories on recent ownership transfers.
The purpose of presenting these stories is to provide an understanding of the important elements of ownership transfer and to start buyers/sellers thinking. This is not an exhaustive list nor should it be used as a business guide. It is simply a snapshot of examples of ownership transfer.
Prarie Pharmacy
On a prospecting call to a long-time independent owner, the McKesson account manager picked up on several clues in his conversation with the pharmacist that things weren't going well and that he was looking to sell his pharmacy. The 1,500-square-foot pharmacy was doing about $500,000 a month in sales but the owner had made several poor investments and, for a variety of reasons, had run into trouble with recordkeeping in the past. The rural store was successful -- it filled 500 scripts per day and had a good DME business -- and didn't have much competition, but the owner was getting ready to get out of the business.
The account manager expressed an interest in helping the owner find a buyer for the pharmacy. Another McKesson customer, John, had previously purchased five pharmacies from his father who had retired. John had successfully taken over the pharmacies and was looking for expansion opportunities. In his quarterly business review, he mentioned his desire to expand. McKesson put the two owners in contact. In order to assure himself that the business was solid, John spent a week working in the pharmacy, without pay. He was able to assess the business from the inside and felt that it could be very profitable.
John structured a purchase that worked for both parties. McKesson made him a long-term loan, which, coupled with the money he invested, provided a payment to the previous owner of approximately 25%. The previous owner financed the rest of the purchase, which provided him with 10-year cash flow that let him avoid the tax implications had he received a lump sum payment upfront. Subsequently, John obtained a loan from his local bank, which he used to pay off his McKesson loan. The previous owner continued to work in the pharmacy one day per week and took an active role in expanding the DME section.
Adam's Pharmacy
Ted had been a regional manager for a large national chain for five years and he was ready to own his own store. He contacted RxOwnership and discussed his experience and goals with his Ownership Consultant. They were aware of a pharmacy owner who was ready to retire and sell his store but didn't want to sell to a chain.
The seller, a sole proprietor, had grown two pharmacies into excellent businesses over 20 years in a suburban area. Each pharmacy was filling 250—300 scripts per day and had large front ends with significant DME and home healthcare businesses.
Ultimately, Ted was able to arrange an SBA loan for 25% of the store's value. The previous owner provided the rest of the financing, selling the remaining percentage of the store to Ted over the next three years. The previous owner continues to work part time in one of the pharmacies and acts as a consultant to the new owner. He is delighted to see his legacy being continued and grown.
Sunshine Pharmacy
A community hospital in an upscale suburban area had a clinical pharmacy on the first floor of the hospital. While patients and physicians liked the convenience of having a pharmacy in the hospital, the pharmacy wasn't breaking even. The hospital administration felt that an independent owner would be more successful than a staff pharmacist at taking advantage of this opportunity.
Sarah, a pharmacist in the community, currently owned a pharmacy and had owned and sold several other pharmacies over the course of her career. At a meeting of her state pharmacy association, Sarah heard about the hospital's situation and contacted the hospital administrator to discuss the possibility of purchasing the pharmacy.
A long-time McKesson customer, Sarah contacted her sales representative and area credit manager to discuss ways in which they could help her finance the purchase of the pharmacy. McKesson made Sarah a short-term loan so she could quickly take advantage of this excellent opportunity. Sarah contacted a local bank with whom she had worked previously and was able to obtain a long-term loan with which she paid off her loan to McKesson.
Blue Pharmacy
When Bill was approached by a chain to sell his store for a very good price, it galvanized him to finally take action on what he'd been thinking about for several years. After 33 years of running his own pharmacy in the rural community in which he had been born and grown up, he still wanted to work in the pharmacy but he didn't want all of the responsibility of the store.
He couldn't see selling to a chain, even though the offer price was more attractive than what he would have imagined. The thought of having his long-time customers getting their prescriptions filled and counseling done at a chain didn't sit well with him. His customers tended to be low income, many of them farmers and factory workers.
In a passing conversation with a colleague, Bill mentioned his desire to pass on the sole proprietorship of his store to another independent owner. The colleague happened to know a young pharmacist, two years out of pharmacy school, who was working in a chain in the next state but was ready to move into independent ownership. The colleague made the connection between Bill and Amber, the young chain pharmacist.
Bill and Amber met and were able to structure the sale of the pharmacy, albeit at a significantly lower price than the chain offered. Bill felt so strongly about keeping the pharmacy independent that he was willing to forego the extra money. Amber was able to raise 20% of the cost as a down payment through a bank loan and personal funds. Bill provided a promissory note for 80% of the cost at prime +1% (adjusted annually) for 15 years. Bill has remained very active in the pharmacy, working 25 hours a week. He has become a mentor to Amber and both realize that they are thriving in this arrangement.
Middlefield Pharmacy
Lynne's family had built a regional chain of 12 pharmacies over the previous two decades and so he knew just about all of the independent pharmacists in his half of the state. The family-owned chain was known as a consolidator, always interested in talking to independents who ran good operations but were ready to get out of the business.
Joe, an independent owner for 15 years, had suffered a mild heart attack the year before and his physician had told him that he needed to scale back on his work. He had tried to bring in a junior partner but the young pharmacist he thought was the right candidate didn't work out.
At his wife's urging, Joe called Lynne to see if there would be a way that he could sell the store to Lynne's regional chain and still continue to work full-time but not have to deal with all the stress of owning the pharmacy, including dealing with PBMs, personnel issues, and so forth.
It turned out that Joe's pharmacy was in a rural community that the regional chain was interested in expanding into before a national chain moved into the town. Because Lynne had a good deal of experience in purchasing pharmacies, he and Joe were able to structure a deal in five months in which Joe was bought out for a single lump sum. McKesson provided six-month dating, with payments due in the fourth, fifth, and sixth months. Joe continued as the pharmacist in charge and works full time but now when he goes home, he doesn't feel the weight of the pharmacy hanging over him.
