Top 5 Tips for Buying into a Pharmacy Partnership

Natalie Sirianni

12 September 2023

Partnership is a fantastic option for anyone looking to get into pharmacy ownership. Particularly given the amount of equity required to purchase a pharmacy outright in the current market. There are both benefits and disadvantages to partnership, as opposed to buying on your own.

Given the current uncertainty regarding 60-day dispensing, we have had a number of young pharmacists that were considering junior partnership approach us with questions and concerns about whether to go ahead and if so, how to go about it.

As such, here are our top 5 tips for pharmacists who are considering entering a partnership (as a working partner), particularly in light of the current uncertainty.

1 - Prepare & Sign Partnership Agreement
This is the most important tip for anyone going into partnership. The Partnership Agreement should outline roles and responsibilities in the partnership and address how the business and partners will act in certain scenarios. It should cover things like buying a further share in the business, how the business would be valued in that scenario, how partners can sell out, what happens if a partner becomes unwell and can’t work and what happens in the case of illegal activity by any partner, or in the case of death. Plus, much more! It is often a fairly negative document as it deals with all the scenarios of what could go wrong and how to act in those circumstances. But it is really important that these factors are considered and dealt with up front and not at the time they occur. That way, whenever something arises within the partnership, you can refer to the Partnership Agreement and act accordingly. Make sure you work with a pharmacy specialist solicitor to assist with the preparation of this agreement.

2 - Agree to Operational and Business Management Issues
While the Partnership Agreement will cover all of the key changes that can occur within the partnership, it is also important to consider issues around the day-to-day management of the business. This can include the roles of each partner, hours to be worked by and duties of each partner, who has authority to make decisions for the business, remuneration of each partner etc. These may be dealt with in the Partnership Agreement, but should also be reviewed regularly in light of the current and changing operations of the business. (The Partnership Agreement is more a set and forget document that you will use when you need to. But these operational factors will likely be reviewed regularly).

3 - Address Uncertainty around 60-Day Dispensing
If you have concerns about the future financial performance of the business due to 60-day dispensing, make sure you advise your potential partners right away. It is important that you discuss these key issues as a partnership. There are ways that you can alleviate any potential concerns here and reduce your risk as an incoming partner through Earn Out or Claw Back arrangements. (We will leave the technicalities of this to another article). Obviously if you are buying into a pharmacy business, you will need to be positive and optimistic about the future of pharmacy, but if 60-day dispensing is the issue that is holding you back from making the leap into pharmacy ownership, then there are ways that this can be addressed when buying into a partnership (as opposed to buying a business outright).

4 - Do your Due Diligence
For any business purchase or investment, it is critical that you do your due diligence! Sometimes when buying into a partnership, junior partners are less likely to complete a full due diligence on the business, particularly when they already work in the pharmacy. Even if you currently work in the business you are buying into, it is critical that you, your accountant and solicitor independently complete a full due diligence of the business, to ensure you are buying what you think you are buying. And remember to use pharmacy specific advisors to assist with this.

5 - Review the Partnership as well as the Business
Often when buying into a pharmacy partnership it is easy for incoming partners to assess the partnership and partners, rather than the business itself, and vice versa. It is very important that when buying into a pharmacy partnership that you review and assess BOTH the partnership and partners you are buying into, as well as the business itself. You need to be comfortable with all aspects of the business and the partnership.

As mentioned, partnership can be a great option of those looking to get into pharmacy ownership, and has been fantastic for many pharmacy owners over the years to share the joys and responsibilities of business ownership. Partnerships can however, often be more difficult to get out of if anything goes wrong, or your circumstances change, so make sure you get it right from the start.

We hope these tips assist you! If you have any questions about partnerships, or would like to discuss the current pharmacy market, please feel free to reach out to me on 1300 ATTAIN (288 246). I look forward to discussing with you further!