Million Pharmacy Acquisition And Portfolio Refinance

The Client

Experienced pharmacy operators were looking to expand their portfolio through the acquisition of two additional pharmacies in South Wales. Alongside the purchase, they wanted to incorporate one of their existing pharmacies into the funding structure, creating a tailored finance solution to support the continued growth of their business.

The Challenge

The clients required a significant funding package that would allow them to complete the new pharmacy acquisition while simultaneously refinancing approximately £1.1 million of existing pharmacy debt.

The existing pharmacy had not yet been formally valued, although its latest financial information showed annualised EBITDA of approximately £167,000 before reviewing potential adjustments.

The accounts also included substantial management and director charges. These needed to be investigated and clearly explained to determine whether any of the costs could reasonably be treated as EBITDA add-backs by the lender.

The overall funding structure therefore needed to accommodate:

The acquisition of two additional pharmacies

A combination of leasehold goodwill and freehold property

The refinancing of existing pharmacy borrowing

Multiple trading entities within a consolidated lending structure

Potential adjustments to the reported profitability of the existing business

Our Approach

We reviewed the acquisition details, existing borrowing, management information and supporting financial documents before presenting the consolidated proposal to a specialist healthcare lender.

Rather than considering the new acquisition in isolation, we demonstrated how the clients’ existing pharmacy business could be incorporated into the transaction to create a wider portfolio funding structure.

We also highlighted:

The clients’ existing pharmacy ownership and operational experience

The underlying EBITDA of the existing pharmacy

The potential availability of legitimate management and director cost add-backs

The freehold security included within the acquisition

The opportunity to consolidate the existing debt alongside the acquisition funding

The Solution

We obtained indicative terms for a consolidated commercial funding facility of £2,980,000.

The indicative structure included:

Total funding: £2,980,000

Purpose: Pharmacy acquisition and refinance of existing borrowing

Facility term: Five years

Interest margin: Bank of England Base Rate plus 1.50%

Arrangement fee: 1%

Early repayment charges: None on the variable-rate facility

Annual overpayments: Up to 10% of the loan balance each year without penalty

Arrangement fee: Capable of being added to the facility

Fixed-rate options: Available for periods between one and ten years

Flexible rate structure: The facility could be arranged on a fully variable, fully fixed or part-fixed and part-variable basis

The lender was also prepared to consider adding the relevant security costs to the borrowing, subject to the final lending and security structure.

The Outcome

The proposed funding structure demonstrated that the clients could potentially raise almost £3 million through one consolidated transaction.

This would allow them to:

Acquire two additional pharmacy businesses

Refinance approximately £1.1 million of existing debt

Incorporate both leasehold and freehold assets within the structure

Avoid early repayment charges on the variable-rate facility

Make annual lump-sum reductions of up to 10% without penalty

Choose between fixed, variable or blended interest-rate options

Simplify the group’s borrowing under one coordinated funding strategy

This case highlights the importance of considering the client’s entire pharmacy portfolio rather than assessing an acquisition on a standalone basis. By reviewing the existing businesses, security and potential financial adjustments, we were able to present a more comprehensive proposal and obtain indicative appetite for a complex multimillion-pound transaction.

Please note: This case study is based on a genuine client scenario. To protect client confidentiality, specific figures, dates and other identifying details have been amended. The circumstances, solution and overall outcome remain accurate.