Home' Australian Pharmacist : Australian Pharmacist June 2014 Contents Australian Pharmacist June 2014 I ©Pharmaceutical Society of Australia Ltd.
BY GARY IMMERMAN
Most recently qualified pharmacists aspire to eventually own and operate
their own pharmacy. Despite record low interest rates, it is still a daunting
prospect to finance an existing pharmacy or establish a greenfield site.
Throw in the challenges of managing the
financial aspects of the practice, from daily
and monthly cashflows and inventory
management to taxation compliance, and
the transition from pharmacist to small
business owner becomes significant.
The opportunity may arise to purchase
an interest in a pharmacy, possibly as
an equal or minority stakeholder which
can provide a more viable alternative to
‘going it alone’. It requires less finance
upfront and most likely has the support
of experienced pharmacy practitioners
and business operators. Buying into a
successful pharmacy chain or partnering
with an experienced pharmacist brings
with it the benefits of proven business
processes and an opportunity to learn the
ropes of running a pharmacy.
A potential purchaser must undertake
due diligence, considering the valuation
of the pharmacy practice, the resulting
purchase contract and, importantly, the
A partnership agreement (or shareholders’
agreement, depending on the legal
structure of the pharmacy) covers the
essential financial and commercial
terms of operations between the
• the drawings of each partner;
• the maintenance of individual
• how surplus funds generated by the
practice are applied, and
• the expectation on partners to fund any
future requirements that business cash
flow may not cover.
Whilst daily management decisions
should be made with common sense
and goodwill between the partners,
the formal governance of the practice
is addressed by provisions in the
partnership agreement. These provisions
are of particular importance for a
minority partner as they establish the
boundaries of authority and define
where one can be outvoted on a
particular matter. Generally, the more
important decisions of the practice
require unanimous or majority consent,
such as the ability to pledge the business
assets, enter into leases and incur
The partnership agreement also
addresses consent to sell the practice.
The so called ‘drag-along’ and ‘tag-
along’ clauses can provide a safeguard
to parties if properly considered and
drafted. For example, a ‘tag-along’
clause gives protection to the minority
partner by forcing an offer made to
the majority partner to be extended, on
the same terms and conditions, to the
Exiting the practice either by voluntary
retirement or due to illness or death is
another critical element detailed in the
partnership agreement. It should consider
how the partnership interest is valued
and the payment terms under different
In the case of death, the partnership
agreement provides guidance for estate
planning, setting out how partnership
interest payouts are treated. It is essential
that the partner’s dependants understand
how much and when they can expect
to receive payment. Life insurance also
plays an important role in the agreement.
In contemplation of the death of a majority
partner, it is critical for minority partners to
confirm these insurance arrangements to
avoid being saddled with the huge financial
burden of having to fund the payout to the
deceased partner’s estate.
For any ambitious minority business owner,
acquiring additional partnership interest
is a key consideration. This can often be
accommodated in an orderly stepped
approach by the granting of options to
purchase additional interest at a prescribed
price according to a set timeline. This can
give the minority partner certainty and
enable him to plan accordingly.
Good partnerships allow the strengths
of the individual partners to shine and to
provide mutual support and know how.
Sometimes relationships do break down.
The agreement should provide a framework
for dispute resolution and mediation,
and ensure the basic tenet that no action
which benefits a particular partner is to the
detriment of the business as a whole.
The partnership agreement thus deals
with all elements of business operations.
Seek professional advice from your team
of experienced accountant, lawyer, banker
and insurance broker, go in with your
eyes open, understand the provisions and
mechanics of the agreement, and embrace
this next step in your career.
Gary Immerman is Director – GMK Partners in
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