On a prospecting call to a long-time independent owner, the McKesson account manager picked up on several clues in his conversation with the pharmacist that things weren’t going well and that he was looking to sell his pharmacy. The 1,500-square-foot pharmacy was doing about $500,000 a month in sales but the owner had made several poor investments and, for a variety of reasons, had run into trouble with recordkeeping in the past. The rural store was successful — it filled 500 scripts per day and had a good DME business — and didn’t have much competition, but the owner was getting ready to get out of the business.
The account manager expressed an interest in helping the owner find a buyer for the pharmacy. Another McKesson customer, John, had previously purchased five pharmacies from his father, who had retired. John had successfully taken over the pharmacies and was looking for expansion opportunities. In his quarterly business review, he mentioned his desire to expand. McKesson put the two owners in contact. In order to assure himself that the business was solid, John spent a week working in the pharmacy without pay. He was able to assess the business from the inside and felt that it could be very profitable.
John structured a purchase that worked for both parties. McKesson made him a long-term loan, which, coupled with the money he invested, provided a payment to the previous owner of approximately 25%. The previous owner financed the rest of the purchase, which provided him with 10-year cash flow that let him avoid the tax implications had he received a lump sum payment upfront. Subsequently, John obtained a loan from his local bank, which he used to pay off his McKesson loan. The previous owner continued to work in the pharmacy one day per week and took an active role in expanding the DME section.