What do buyers consider when assessing a pharmacy business that is on the market? Their first tangible interaction with the business is typically the Information Memorandum (IM) they receive. For this reason, the IM is an incredibly important document. It must be clear, professional, and comprehensive, providing buyers with all the information they need to properly evaluate the opportunity.
A strong IM should allow a buyer to assess not only the adjusted net profit (or EBITDA), but also the various income streams, future growth opportunities, reason for sale, demographic profile, tenure details, and other key operational factors. In many ways, the IM is the primary sales tool and plays a critical role in presenting an accurate and compelling picture of the pharmacy being offered to the market.
The IM should contain enough detail for a buyer to conduct an informed initial analysis of the business. However, some buyers may request additional information, which is perfectly reasonable. That said, there is an important distinction between obtaining further operational detail and undertaking formal due diligence. Documents such as BAS statements, tax returns, supplier invoices, and other sensitive financial records are generally provided during the due diligence phase. The purpose of due diligence is to verify that the information presented during the marketing process is accurate and substantiated.
Most IMs will also include an asking price for the business, together with supporting rationale behind the valuation. As a broker, it is often possible to quickly identify whether a buyer has genuine interest in a business or is merely testing the waters. Experienced buyers who understand the market are typically able to analyse an opportunity efficiently, form a clear view of value, and submit an offer that reflects prevailing market conditions, particularly in a strong sellers’ market. Sellers generally respond positively to well-considered and commercially realistic offers, while significantly under-market offers can create the opposite reaction. While every buyer naturally hopes to secure a good deal, caution should be exercised in submitting offers that are perceived as unreasonably low.
A key takeaway for buyers is to be prepared to assess opportunities quickly, understand the current market dynamics, have clarity around their financial position, and make an offer that appropriately reflects their view of the pharmacy’s value.