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Towards Ownership

Towards Ownership

Capital Chemist ownership

This document is designed to codify the considerations for identifying potential owners of new Capital Chemist stores (both buying a new store or opening a greenfield site). Some of these considerations may also be important with changes of ownership.

There is no one single rule about who gets to partake in Capital Chemist ownership. It is a negotiation between interested parties. Which guidelines are used and in what order they are treated will vary because each transaction brings a unique set of circumstances.

In all cases it is the group’s expectation that due consideration be given to all existing partners who are potentially affected by the new location or changes to an existing location.

The following factors should be taken into consideration – and CCHO will facilitate discussions with these factors in mind.

Who found the opportunity?

The person who identified the opportunity would reasonably have expectations of ownership.

Finding the pharmacy could be as simple as making initial contact with a broker or it could also be the result of long-term approaches to a store encouraging the owner to sell or it could be due to relationships with developers that can take years to come to fruition.

When dealing with a broker be aware that other members of the Capital Chemist group may be having similar discussions about the same pharmacy; for this reason we recommend that you inform head office early in the process to avoid a bidding war against ourselves.

Where did the potential managing partner come from?

Has a pharmacist been groomed for the role through employment as an existing employee in a Capital Chemist pharmacy? Their mentors/employers might potentially have expectations of involvement.

In the case where an employed pharmacist from one store is contemplating moves to ownership outside of their current store, it is expected that discussions take place with their current employer before any decisions are made. It is noted that often these transactions retain a degree of commercial-in-confidence which may limit the timing and content of discussions.

Who has been on the “waiting list”?

Is there an existing partner willing and able to assume the mantle of hands on managing partner (e.g. an owner not currently managing a store, or an owner wishing to relocate)? An existing partner might expect to be considered above a non-owner.

There is a list of potential owner pharmacists who have been through a modest degree of vetting by CCMC. Nominally these pharmacists are “more ready” for ownership. CCMC expects that potential owners provide a 500 word submission on why Capital Chemist is the model for them, and a copy of their CV. These are kept on file at CCHO for when potential opportunities arise.

In addition the aspiring owner should have a discussion with CCHO staff (over three or four hours) about the CC model, the finances, how the process works and how the path to ownership may proceed.

Importantly CCMC requests a meeting with potential owners, preferably well before ownership is imminent. This is a chance for CCMC to share the group’s values and allows the prospective owner an opportunity to understand the rights and responsibilities that come with ownership and group membership.

If any partners know of pharmacists who might wish to become owners in our group, please refer them to the Group Business Manager to start the process.

Geographical considerations

Which nearby pharmacies might be impacted? Do the local owners want to be involved? The definition of local will vary with each transaction but generally would include pharmacies that might have customer behaviour impacted by the proposed pharmacy.

Who can bring value to the business?

The managing partner has the right to select partners who they feel will bring skills and expertise to the business. They may need someone with HR skills, management skills, computer skills or marketing experience. The mix of owners’ skills and experience should be complementary.

Where previous steps/considerations have not yet brought the right people to an agreement an invitation might be extended to all partners seeking expressions of interest. Where there are more expressions of interest than there are shares available the nominated managing partner may choose or the GBM may facilitate a vote by all partners.

It is neither practical nor desirable to force a managing partner into ownership with people they would rather not be in business with; for this reason it is recommended that the nominated managing partner has some degree of veto over the choice of partners. As mentioned at the beginning of this document, the process is a negotiation between interested/affected parties.

What share does each owner get?

There are multiple considerations and no definite rules. The managing partner would (rightly) expect to have a substantial share. This varies in our group from 10% to above 70%. The managing partner (or partners in some cases) will be responsible for all aspects of running the pharmacy from day to day. Longer-term strategic decisions would generally be made in conjunction with all owners of the pharmacy.

There are situations where a holding of less than 20% may have taxation implications. This is structure-dependant but it is important to keep this in mind.

Shares below 10% are discouraged. The Capital model relies on the pharmacy being used as security for finance with all owners cross-guaranteeing business loans for all partners in that pharmacy – even partners who do not have loans for that business. A share less than 10% might not seem real or tangible but even small shares come with 100% of the risk from the cross-guarantee process.

Agreement vs handshake

Ownership comes with responsibilities. All owners/potential owners should have a conversation about roles, responsibilities and expectations. The agreement between owners could be a handshake, or could involve a written document. The written document could include a partnership/shareholder agreement, and/or a buy-sell agreement.

Each ownership situation will require a slightly different approach. CCHO can facilitate discussions with advisors (internal or external) about the nature of these agreements. If issues arise we have access to a range of tools to help mediate the problem, both in getting to the point of ownership and after the structure is up and running.

Succession planning

It is never too early to think about the next stage. It is recommended that all partners be kept appraised of the plans and expectations of other partners – even if it is years before the event.

Agreements about future ownership changes and sell-downs can be documented at any time to give certainty to all parties. CCHO can facilitate this process if required.

Management Committee

CCMC cannot dictate or force ownership. CCMC are responsible for deciding whether or not a store is part of the Capital Chemist group.

Abbreviations used above

CCHO: Capital Chemist Head Office

CCMC: Capital Chemist Management Committee

GBM: Group Business Manager

The next step…

Come and talk to us at capital Chemist Head Office.