Why Confidentiality Is Key When It’s Time to Sell
By Bill LaRose, R.Ph |
“Could I tell him why you’re calling, please?” asked the tech.
“Yes, this is in regard to him selling the store.”
In a matter of moments, that simple exchange torpedoed the confidentiality of a potential pharmacy acquisition. You can imagine how the news rattled the ranks of a formerly stable staff. “Oh boy, a new owner is coming in. Will we still have jobs? Maybe we should start looking now.”
What else could go wrong?Breaching confidentiality on a prospective pharmacy sale does more than cause panic among employees. When word gets out to the general public, customers start to worry about getting their prescriptions filled and continuity of existing services. And when patients take their business elsewhere, sales drop and the value of the store decreases.
Equally bad, competing pharmacies won’t hesitate to entice consumers away from a store where the cover has been blown on changing ownership. Additionally, it’s not unheard of for a competitor to pose as a buyer as a means of obtaining an unmasked seller’s financial records or other proprietary information.
Vendors and landlords may pile on a prospective seller, too, with attempts to tighten credit terms and conditions.
As you can see, the more tight-lipped you can be about an impending ownership transition, the better off you’ll be. Let’s look further into how to keep the secret locked down.
How to stay stealthy
Some pharmacy owners opt to work with an experienced advisor or intermediary when they decide to sell their business; others go it alone and steer their way through the process. In either case, it’s best to release information only on a “need-to-know” basis. The following tactics will help keep things under wraps.
generic with initial marketing
For all the reasons already stated, you won’t be posting a “For Sale” sign in your storefront window. However, you’ll need to market the property in some way to potential buyers. Many sellers place enticement ads that describe the pharmacy in broad terms such as geographic location (e.g., Northwestern Texas), revenue, number of prescriptions, cash flow, inventory and asking price. Other details may include number of years in business, services offered, patient demographics and opportunity to expand over the long term. Interested parties should be directed to complete a questionnaire, which helps to qualify the preferred type of buyer without giving away the seller’s identity. The form should be routed to an unidentifiable email address; if you need to create a new address, services such as Gmail offer free accounts.
an NDA in effect
Once you’ve qualified a buyer via the questionnaire, the next step for any potential sale is to execute a non-disclosure agreement (NDA), signed by both parties. Legally binding, the NDA requires the prospective buyer and seller to maintain confidentiality on defined information (e.g., financial documents, marketing plans, pharmacy procedures) for a specified period of time. Violation of the NDA could carry monetary penalties and injunctive relief to prevent further breaches.1 Make sure you’ve got an NDA in place before releasing any information about your store, including its name and physical location. No store-identifying information should be given to anyone who has not executed the NDA.
a private call
Once you’ve secured the signed NDA, aim to develop a relationship with the buyer via a “get-to-know-you” conversation. Again, don’t use your store’s phone line for the call. Instead, set up an account with a free service such as Google Voice, which allows calls to be forwarded to your private number without exposing identifying information. When working with an advisor or intermediary, he or she can set up a three-way conference call and be on the line to assist in answering questions from the seller. Note that any calls of this type should be held outside of the existing business whenever possible. If you must take a call at your store, do so behind closed doors or outside normal business hours when staff members aren’t present.
Assuming there’s interest in closing on a sale, arrange an in-person meeting with the buyer at a neutral venue such as a restaurant. In most cases, the buyer will also want to visit your store and evaluate things firsthand, which is fine—as long as it happens when the store is closed to employees and the public. In some situations, the buyer may want to pose as a consumer during business hours to get a feel for day-to-day operations, customer service and store displays. In that type of scenario, make sure the buyer remains anonymous per terms of the NDA and stays away from conversations with employees that might tip off an impending deal.
When it appears that a deal is imminent, you and the buyer need to determine whether consummation is contingent upon certain employees remaining on staff. If so, it’s understandable that the buyer will want to meet the affected staffers and make them feel comfortable. The buyer might explain things in this way: “I’m really looking forward to having you come aboard, but we’re in a position where we’ve got to keep this confidential.” Once you’ve worked through personnel issues, schedule a store meeting, during which you’ll introduce the buyer and any relevant contingencies (e.g., you’ll be staying on for a couple months through the transition phase).
Any hint of uncertainty could give patients a reason to switch pharmacies, so wait until the deal is done to notify your customers. A great way to handle that is to pull addresses from your patient records and send out a direct mailing. Explain that you’ve found the perfect individual to carry on the store’s legacy, emphasize your plans for continuity and invite patients to stop by the pharmacy to meet the new owner.
In the end, the hallmark of a confidentially orchestrated pharmacy sale is more than just a smooth transition of ownership—it’s having the store seamlessly carry on the operations of the previous establishment for both patients and staff alike. Using discretion is the key to creating a foundation of “business as usual,” and maintaining it through the entire process positions the buyer to meet and exceed the expectations of the community moving forward.