How to choose your transition lawyer
Selling your pharmacy is not just a financial transaction, but a legal one, and it behooves you to consult a lawyer early in the process. A good lawyer with experience in the sale of businesses is an important player on your transition team, and they will work with your team lead, accountant, tax and financial advisors to determine the structure of the deal before going to market. This is vital information for your marketing materials, as it will direct the potential buyer on putting together an offer that benefits you.
As well, your lawyer will prepare and advise on the form and substance of your non-disclosure and non-compete agreements. And once an offer comes in, they will review any documentation that comes with it, such as letters of intent (LOIs) and definitive purchase agreements. Rest assured your buyer will have legal representation. So must you.
Not all lawyers are created equal, and it is important to distinguish between the different specializations – tax lawyers, estate lawyers, litigators, generalists, and corporate lawyers. Here are a few things you should look for in your transition lawyer:
- Experience in transactions generally, and in pharmacy transactions specifically
Pharmacy operations, valuation, and sale transactions are complex, and the Canadian retail pharmacy industry is not quite like any other, so some understanding and experience on the part of your lawyer can be enormously beneficial. You do not want to have to train your lawyer – or pay your team lead to teach them – in all things pharmacy. Usually, we prefer pharmacist-owners to work with a corporate lawyer, as they are likely to have the most relevant experience. Generalists might be fine, but only if they have a significant background in business sale transactions; you do not want yours to be their first. So ask before you hire. Check references. And reach out to your accountant or team lead for recommendations. - Familiarity with local and provincial pharmacy statutes, and other specialized knowledge
Ideally, your lawyer will have knowledge of your province’s and municipality’s statutes governing pharmacies. They should also have a solid understanding of banner and wholesale agreements, specifically of how rights of first refusal (ROFRs) might impact your exit efforts. Leases are often an important consideration in pharmacy transactions, so experience in divesting current leases, and the ability to explain both the benefits and the obligations of them, is also essential. - Solid negotiating and interpersonal skills while being deal-centric
You want a lawyer who can play well with other lawyers and your other advisors, as they will know no doubt have lots of interaction with the other side’s legal representation. Having someone capable and experienced in that back-and-forth is vital. Remember, too, that you and your team will have to negotiate more than just price; legal matters, such as the terms and conditions of a definitive agreement, require a skilled negotiator. However, we would also urge you to ensure your lawyer can keep their eye on the prize: a deal. You want them to guide you – as efficiently as possible – to a closing, not run up the bill. And always be sure to ask them for an estimate of what the final bill will be. - Creativity and risk-awareness
There is plenty of room for legal creativity in business negotiations, so try to get a sense of innovative approaches a prospective lawyer has taken in the past. As well, your lawyer should be highly attuned to real and potential risks in any deal, be able to point them out to you so you can make informed decisions, and be able to provide methods of mitigating them. - Tax knowledge
Finally, while not essential, experience in working with the Canadian Income Tax Act will be a bonus. Familiarity with the Act will increase your odds of a sale structure that reduces frictional tax costs.
In our next post, we will discuss what you should look for in your transition team’s accountant.
