1. Pharmacy Owner’s Guide To Exit Strategies
Presented by:
Guy W. Stillwell, R.Ph.
Pharmacy Consulting Associates, Inc.
PCA

2. Disclosures
Stock Holder: PCA-Pharmacy Consulting Associates, Inc. / President

3. Program Outline Market Trends Timing Considerations Market Valuation
Potential Buyers
Preparing To Market Your Pharmacy
Professional Resources
Owner Financing/ Junior Partnership
The Selling Process

4. Market Trends Is Independent Pharmacy Strong Again?
: Independent Pharmacy decreased by 8,000 units
: Independent Pharmacy decreased by 1,700 units
: Independent Pharmacy decreased by 900 units
: Independent Pharmacy decreased by 770 units
The strength of Independent Ownership

5. Market Trends Transfer of Ownership
Pharmacists are becoming more interested in ownership.
Chain file buys are no longer your only option.
Metro community pharmacy owners are challenged by not having full access to buyers.
Are smaller community pharmacies able to attract young healthcare professionals?

6. Market Trends Where are we today?
Independent Pharmacy Projections for 2010
Metro vs. Rural Trends
The Future
Pharmacy Market Values

7. Timing Considerations The 5-10 Year Planning Process
Potential Buyers
Junior Partner
Key Employee
Lease Terms
Corporate Structure
C-Corp
S-Corp

8. Timing Considerations The 3-5 Year Planning Process
Financial Metrics
Balance Sheet
P&L
Cash Flow
Market Valuation
Industry Valuation Metrics
Cash Flow Analysis
Buyer’s ROIC/ROCC
Obtain Expert Advice

9. Timing Considerations The 3-5 Year Planning Process
Operational Factors Affecting Market Value
Private Charging
Unit Dose Packaging
Delivery Service
Niche Services
Compounding
DME
Specialty Pharmacy
Nursing Home

10. Timing Considerations The One Year Planning Process
Market Valuation
Identify Buyers
Exception: JP Program needs to be established 5-10 years prior to transfer date
Obtain Expert Advice
Accountant
Legal Counsel
Business Consultant specializing in Pharmacy acquisitions and mergers (The buy/sell process)

11. The Market Valuation What is My Pharmacy Worth?
Industry Metrics
$/Rx plus Inventory
Range: $0-$30/Rx
Multiple of Net Income
Range: 0-5x Net Income
% of Sales plus Inventory
Range: 0%-40% of Total Sales

12. The Market Valuation What is My Pharmacy Worth?
Why the Metrics Do Not Work
Ranges are Variable
Standard Metrics are Unreliable
Lack Specific Market and Pharmacy Data
How to Understand the Metric Values for Your Pharmacy
Know the Market
Engage Expert Pharmacy Appraisal Consultant

13. The Market Valuation What is My Pharmacy Worth?
Buyer’s Perspective
Continuation of Business
Cash Flow
ROIC/ROCC
Financing
File Purchase
Retention
Operational Blending
ROIC

14. Potential Buyers Identify all Buyers in the Market
Key Employees
Local Independents
Regional Independents
Independent Pharmacy Investors
Chain Pharmacies
Specialty Pharmacy Operations

15. Potential Buyers Engaging All Your Buyer Resources
Explore all of your options
Strategically weigh the pros and cons
Independent
Chains

16. Preparing To Market Your Pharmacy Protecting your Business and Maximizing Value
Confidentiality and Non-Disclosure Agreements
Providing Documentation-The Presentation
Notification of Staff, Family, and Friends
Engage Expert Assistance

17. Professional Resources
Legal Counsel
Accountant
Limited Knowledge Regarding Pharmacies
Business Consultant
Expert on Pharmacy Valuation
Increases Potential Buyer Pool
Minimizes Your Worry – Manage Entire Process
Maximizes Your Value – Expert Negotiations

18. The Selling Process Critical Steps in Maximizing Your Value
Strategically Provide Documentation based on Buyer’s Due Diligence
Only provide exactly what is requested
Obtain LOI prior to full disclosure
Understand Buyer’s operation, needs, and expectations
Understand Buyer’s financial position
Does Buyer’s financial position facilitate sale

19. The Selling Process Critical Steps in Maximizing Your Value
The Asset Purchase Agreement (APA)
Stock Sale vs. Asset Sale
Asset Allocation
“Going Concern” vs. “File Buy”
Lease Assignment or Restrictions
Prescription Retention Holdbacks
UCC (Liens) Filings

20. The Selling Process Critical Steps in Maximizing Your Value
The Non-Compete Agreement
Determination of Restrictions
Term
Geographic Radius
Seller’s Plans
Determination of Value
Corporate Structure
Paid to Seller Personally
Tax Concerns

21. The Selling Process Final Steps
Preparing for the Closing Date
Removal of Buyer’s Contingencies
Regulatory Notifications
BOP
DEA
Medicaid
Medicare
Inventory
Dating
Inventory Level

22. Owner Financing/Junior Partnership Is Owner Financing for Me?
Security Positions
Bank is always first
Personal Guarantees & Cross Collateral
Risks
Default
Benefits
Increases Potential Buyers
Possible Tax Benefits
Provides “Bridge Financing” to Bank Loans

23. Owner Financing/Junior Partnership Is a Junior Partnership Right for Me?
Tax Advantages
Available Programs
Key Employee
Confidence
Trust
Ability

24. Questions and Answers Additional Questions
Contact Information:
Guy Stillwell, R.Ph.
(651) or