overview of the pharmacy acquisitions market · financial performance –turnover 2014 2013...
TRANSCRIPT
![Page 1: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/1.jpg)
Overview of the Pharmacy Acquisitions Market
Stuart FitzgeraldDirector – Fitzgerald Power
![Page 2: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/2.jpg)
Global M&A 2015
![Page 3: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/3.jpg)
Executives M&A plans
59%
41%
Expect to pursue acquisitions in the next 12
months
Yes
No
![Page 4: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/4.jpg)
Executives M&A plans
72%
28%
Are seeking bolt on acquisitions
Yes
No
![Page 5: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/5.jpg)
Executives M&A plans
55%
45%
Have 3 or more deals in the pipeline
Yes
No
![Page 6: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/6.jpg)
What is driving consolidation?
• Boardroom confidence
• Cheap debt
• Pressure to become more efficient
• Desire to keep pace with rivals
![Page 7: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/7.jpg)
International pharmacy consolidation
![Page 8: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/8.jpg)
International pharmacy consolidation
![Page 9: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/9.jpg)
International pharmacy consolidation
![Page 10: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/10.jpg)
Why are pharmacy chains consolidating?
• Strong liquidity in international chains
• Preference for acquisition strategies
![Page 11: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/11.jpg)
Group ownership in pharmacy markets
Ire 26%
UK 61%
USA 63%
![Page 12: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/12.jpg)
Number of pharmacies in Ireland
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Number of pharmacies in Ireland
2002 2015
![Page 13: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/13.jpg)
New openings in Ireland 2015
28
![Page 14: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/14.jpg)
Consolidation or fragmentation?
![Page 15: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/15.jpg)
Changes of pharmacy ownership
2014 45
2015 92
![Page 16: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/16.jpg)
Financial performance – turnover
2014 2013
Turnover €1,531,200 €1,600,000
Items – state 51,251 53,000
Items – private 13,044 12,000
Revenue per item €17.45 €18.38
Private fees €7.00 flat €7.00 flat
OTC/retail mark-up 50% 50%
![Page 17: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/17.jpg)
Financial performance – profit drivers
2014 2013
Gross Profit €689,040 €720,000
GP %age 45% 45%
Generic penetration 85% 80%
Wages & salaries €285,000 €270,000
Rent €50,000 €50,000
Other overheads €72,500 €75,000
![Page 18: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/18.jpg)
Earning vs. maintainable earnings
EBITDA
€281K
MEBITDA
€250K
![Page 19: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/19.jpg)
What determines multiples?• Profile of the target pharmacy
• Revenue growth opportunity
• Local competition
• Local GP profile
• Culture
• Recent deals in the sector
![Page 20: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/20.jpg)
Valuation multiples
Below 4.5: Low volume, revenue difficult to defend, secondary location
4.5 to 5: Mid-sized pharmacy, possibly in secondary location
5 to 6: High items, defendable turnover, possible growth / synergies
Above 6: Strong pharmacy, attractive location, competitive bid process
![Page 21: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/21.jpg)
Indicative goodwill valuation
MEBITDA
€250K
MULTIPLE
5.5
VALUE €1.375M
![Page 22: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/22.jpg)
Financing the deal
• €1.5 millionDeal price to
include net assets
• 1.5 times EBITDADebt cover
• 4.5 times EBITDALeverage
• 10 yearsTerm
![Page 23: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/23.jpg)
Financing the deal
• 4.5%Assumed interest
• €1.125 millionBorrowing
• €139,912 annuallyLoan repayments
• €375K / 25% of deal priceCash required
![Page 24: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/24.jpg)
The problem with predictions
![Page 25: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/25.jpg)
The problem with predictions
“Stock prices have reached what looks like a permanently
high plateau” Irving Fisher, October 1929
![Page 26: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/26.jpg)
The sustainability of current valuations
• Long term sector profit projections
• Competition in the bidding process
• Appetite of the banks
• Availability of alternative liquidity
![Page 27: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/27.jpg)
Thank you
Stuart FitzgeraldDirector – Fitzgerald Power
![Page 28: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/28.jpg)
Legal Issues in Pharmacy M&A
Barbara Kenny
William Fry
25 February 2016
![Page 29: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/29.jpg)
![Page 30: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/30.jpg)
Objectives
What does the Seller/Buyer want to get?
Is price everything?
Non-financial objectives
Seller’s role post sale
Is this the right buyer?
![Page 31: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/31.jpg)
Preparation
Prepare early, agree timing
Advisers
Term sheet
Non-disclosure agreement
![Page 32: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/32.jpg)
Due Diligence
Financial/Tax
Property
• leasehold or freehold?
• term of lease
• planning
Employees
• employment contracts
• history
• key employees
Contracts
• HSE
• change of control
![Page 33: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/33.jpg)
Due Diligence
Regulatory
• Pharmacy Act registration
• Supervising Pharmacist
• PSI Inspections
• Co-location with doctors
• Data Protection
Intellectual Property
• Name/Brand
• Website
• IT systems
Litigation
• Any history
• Insurance claims history
![Page 34: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/34.jpg)
Structure - Share Sale
– Sale of entire issued share capital of company
– Tax considerations
– Contracts/lease normally go with company
Seller
Buyer CoWF Pharmacy Limited
Shares
![Page 35: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/35.jpg)
Structure – Asset Sale
• Pick and choose assets and liabilities
• Tax Considerations
• Property issues
• Employees – TUPE
• Contracts
Buyer CoWF Pharmacy Limited
Certain assets and liabilities
Consideration
![Page 36: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/36.jpg)
Pre-Conditions to ContractDue Diligence
Competition and Consumer Protection Commission
Shareholder consent
3rd party consents (banks, grant bodies)
Employees
“MAC” clause
![Page 37: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/37.jpg)
Purchase Price Options
• Payment in full at Completion
– cash, shares, discharge of liabilities
– capital gains tax clearance
• Deferred Consideration for SPA
– deferred consideration/earn-out
– escrow
– cash free/debt free adjustment
– working capital adjustment
![Page 38: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/38.jpg)
Cash Free/Debt Free
€
• Agreed Consideration = 1,000,000
• Cash at Completion = 200,000
• Debt at Completion = (100,000)
• Adjusted Consideration 1,100,000
![Page 39: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/39.jpg)
Working Capital Adjustment
€
• Agreed Consideration = 1,000,000
• Working Capital Assets = 150,000
– (stock, debtors, prepayments)
• Working Capital Liabilities = (140,000)
– (trade and other creditors,
accrued expenses)
• Adjusted Consideration = 1,010,000
![Page 40: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/40.jpg)
Purchase Price
Completion Accounts
Locked Box
Retention for Warranty Claims
![Page 41: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/41.jpg)
Purchase Price – Bank Funding
• Buyer should be a company
• Mortgage over all assets of Target
• Additional Security? Guarantee?
• Financial Assistance
– Summary Approvals Procedure
– Personal liability – get advice
![Page 42: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/42.jpg)
IndemnitiesWarranties V
![Page 43: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/43.jpg)
Warranties
Scope
every aspect of
the business
constitution and share
capital
accounts
tax
assetsliabilities
employees
pensions
compliance
![Page 44: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/44.jpg)
Warranties• Disclosure Letter
– general disclosures
– specific disclosures
• Warrantors
– management shareholders
– financial investors and other shareholders?
![Page 45: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/45.jpg)
Warranties• Limitations
– time (tax and non-tax claims)
– cap
– minimum threshold
– “several” or “joint and several”
– other standard limitations
– “awareness” qualification?
• Set-Off against consideration
• Tax Indemnity
![Page 46: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/46.jpg)
Other Issues
• Restrictive Covenants
– time, territory and subject matter limits
• Debtor assistance
406666v2
![Page 47: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/47.jpg)
Practical Tips
Prepare early
Consider “must haves” and
“deal breakers”
Retain control and keep all
strands moving
Agree negotiation
tactics
Close quickly
Keep calm!
![Page 48: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/48.jpg)
![Page 50: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/50.jpg)
A profiled approach to pharmacy acquisitions
SAM PATEL
Director – Day Lewis
![Page 51: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/51.jpg)
Identifying targets
• Agents and brokers
• Own networks
• Direct mail
• Advertising
![Page 52: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/52.jpg)
Filtering out the good and bad
Five minute filter:
• Items
• Counter turnover
• Opening hours
• Rent
• How far is it?
![Page 53: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/53.jpg)
Approach to valuations
• Site visit – any skeletons in the closet?
• Building up a bottom-up P&L
– Adjustment for vendors’ salary and operating model?
– Will you add any services?
• Will it go up or down under your management?
• Adjust the multiple according to the risks
– Scripts locked in? Capture rate too high? “Magnet” effect?
– Doctors moving?
![Page 54: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/54.jpg)
Assuring a smooth deal
• Have your funding ready in advance
• Each side to get advisers in place quickly
• Share deals – satisfy yourself on company’s tax situation
• Don’t let the lawyers do all the talking
![Page 55: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/55.jpg)
Managing the takeover
• Reputation counts
• Making people comfortable
• Openness and transparency
• Training and support
![Page 56: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/56.jpg)
Buying well
• Your reputation counts
• Buying off-market
• Build a relationship
• Find mutual wins
• Keep the legals light
• Explore different ownership models
![Page 57: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/57.jpg)
Thank you
![Page 58: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/58.jpg)
Tax, Structuring &
Financial Planning
Aspects
Deirdre Lyons
Tax & Wealth Structuring Specialist – Davy
Pre-Sale Planning for Pharmacies
![Page 59: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/59.jpg)
1. How is my business positioned for a sale?
Key Questions
Legal?
My Pharmacy Ltd.
Commercial?
Tax? Valuation?
Co-shareholders
![Page 60: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/60.jpg)
Do we want to
retire?
Kids’
education?
Future
ventures?
Can we afford to
retire?
Other financial commitments?
2. How am I / we positioned for the future?
Key Questions
My Pharmacy Ltd.
![Page 61: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/61.jpg)
Elements of a good pre-sale strategy
Fit for purpose commercially
Flexible
Tax-efficient
Provisions for retirement
![Page 62: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/62.jpg)
1. Prepare or update your financial plan.
2. Maximise pension funding
3. Ensure current structure is fit for purpose.
4. Be attentive to tax-reliefs which may be relevant on a
future sale.
4 Key Steps
Five to ten years out… what should I be doing?
![Page 63: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/63.jpg)
Aims to help you identify and meet your financial goals
Step 1: Financial Plan
Lifestyle &
Protection
Investment
Strategy
Business Exit
Strategy
![Page 64: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/64.jpg)
Business Exit Timeline
Pre-Sale
Sale
Post Sale
Income from
-Salary
-Dividends
-Other?
Fund pension
Income from
pension / investments
/other
Future Ventures?Ensure this happens
as tax-efficiently as
possible
Financial plan helps track finances when you sell
![Page 65: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/65.jpg)
1. Tax-relief on individual and company contributions
2. Each owner / director spouse can build up a fund of €2M tax-efficiently
3. De-risking wealth from business
4. Tax-relief on income and gains on pension investments
Step 2: Maximise Pension Funding
Why?
![Page 66: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/66.jpg)
Married couple, both spouses working in the business, currently have combined pension assets of c.€500,000. They each have 25 years of service in the pharmacy which they own and run together.
They have significant scope to build up their pension funds through a combination of personal and company contributions.
Starting Value €250,000
Allowable special contribution c.€950,000
Target Value on Retirement €2,000,000
Lump sum on retirement (Estimate) €440,000
Balance to ARF / annuity to help fund retirement €1,500,000
Annual Income assuming a 4% drawdown €60,000
Pension Funding Case Study
Source: Taxes Consolidation Act 1997 & Revenue Pensions Manual. Please note that figures are
estimates and are for illustrative purposes only.
![Page 67: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/67.jpg)
How is the business currently structured?
Sole trade?
Roche
Pharmacy Ltd
Limited Company?Roche
Pharmacy
Ltd
Family
HoldCo
Holding Company?
Co-investors?
Step 3: Structuring the business for sale
![Page 68: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/68.jpg)
It depends: No one size fits all
approach
Consider:
long-term plans
tax-treatment on sale
what a purchaser might want to buy
Advance planning and good
advice are key
Working together: all advisors
cooperating for benefit of client
Which structure is best?
![Page 69: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/69.jpg)
1. Sole trade to limited company
My Pharmacy Ltd
Why?
Benefits of incorporation
More scope for pension funding
Share sale potentially more attractive to a buyer
How?
Potential relief from CGT and management Stamp Duty on transfer of trade into sole name
Some Structuring Options
![Page 70: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/70.jpg)
2. Single Limited Company to Holding Company
My Pharmacy Ltd
My Pharmacy Ltd
Family
Hold Co
Why?
Pay dividends from TradeCo to HoldCo tax-free
Facilitate tax-free sale into HoldCo –provided certain conditions are met
Useful in a scenario with multiple shareholders
How?
Share-for-share exchange
Potential relief from CGT and stamp duty provided certain conditions are met
Some Structuring Options
![Page 71: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/71.jpg)
3. Moving trade into new “clean” company
My Pharmacy Ltd New Co
Why?
Maybe more attractive to a potential
purchaser
Retain certain elements in ‘OldCo’ if desired
How?
Share-for-undertaking exchange
Potential relief from CGT and stamp duty provided certain conditions are met
Some Structuring Options
![Page 72: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/72.jpg)
Basic Position CGT at 33%
Retirement Relief 0% rate of CGT Applies to proceeds up to €750k (or €500k if over
65)
10 year holding period
Working director for 10 years, full time working
director for 5 of those years
New 20% Rate of CGT 20% on amounts up to €1M gains Owned shares for 3 out of 5 years prior to disposal
Worked as manager / director for 3 of 5 years prior
to disposal
Min 5% shareholding
Sale into holding company
from trading company
Tax-free 12 month holding period
Various other conditions
Share buyback by company Income tax (52% / 55%) or CGT
(33%) where certain conditions
are met
Significant reduction of shareholding
For benefit of trade
Vendor unconnected after sale
Other Various other permutations depending on circumstances
Tax Treatment on Retirement
Source: Taxes Consolidation Act 1997. Rates correct as at February 2016.
![Page 73: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/73.jpg)
1. Start early
2. Separate strategy for the
business and you personally
3. Bring it all together….in a plan
Key Actions
![Page 74: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/74.jpg)
Questions?
![Page 75: Overview of the Pharmacy Acquisitions Market · Financial performance –turnover 2014 2013 Turnover €1,531,200 €1,600,000 Items –state 51,251 53,000 Items –private 13,044](https://reader033.vdocuments.site/reader033/viewer/2022042921/5f683bda45f9d660976553ab/html5/thumbnails/75.jpg)
This presentation material, which has been produced
by Davy, is issued by Davy to parties attending the
presentation to which it relates. The information
contained herein does not purport to be
comprehensive. It is strictly for information and
discussion purposes only. To the extent that
individuals request copies of this material, without
attending the presentation which the material was
designed to support, they do so at their own risk and in
the knowledge that the information provided here is
wholly incomplete. The prospectus and supplements
for these funds are available on request from Davy,
Davy House, 49 Dawson Street, Dublin 2.
The information contained in this presentation is not
investment research or a research recommendation
for the purposes of regulations. The presentation does
not constitute an offer for the purchase or sale of any
financial instruments, trading strategy, product or
service. No one receiving this presentation should
treat any of its contents as constituting advice. It does
not take into account the investment objectives,
knowledge & experience or financial situation of any
particular person. Financial Advisors and their clients
are advised to make their own independent
commercial assessment of the information and to
obtain any independent professional advice as may be
appropriate (including inter alia legal and tax advice),
before making an investment decision, and only make
such decisions on the basis of their clients investment
objectives, experience and resources. Interested
parties are not entitled to rely on any information or
opinions contained in this presentation or the fact of its
distribution for the purpose of making any investment
warranty or representation, express or implied, is or
will be provided by Davy or any of its shareholders,
subsidiaries or affiliated entities or any person, firm or
body corporate under its control or under common
control or by any of their respective directors, officers,
employees, agents, advisers and representatives, all
of whom expressly disclaim any and all liability for the
contents of, or omissions from this presentation, the
information or opinions on which it is based and for
any other written or oral communication transmitted or
made available to the recipient or any of its officers,
employees, agents or representatives.
This presentation has been made available on the
express understanding that any written or oral
information contained herein or otherwise made
available will be kept strictly confidential and is only
directed to the parties to whom it is addressed. This
presentation must not be copied, reproduced,
distributed or passed to others at any time without the
prior written consent of Davy. Our conflicts of interest
management policy is available at www.davy.ie.
J&E Davy, trading as Davy, is regulated by the Central
Bank of Ireland. Davy is a member of the Irish Stock
Exchange, the London Stock Exchange and Euronext.
In the UK, Davy is authorised by the Central Bank of
Ireland and authorised and subject to limited regulation
by the Financial Conduct Authority. Details about the
extent of our authorisation and regulation by the
Financial Conduct Authority are available from us on
request.
Important Information