Pharmacy LOI Template: Annotated Deal Structure Guide

Deal Structure Election: Asset vs. Stock Sale for Pharmacies

The asset vs. stock decision is more consequential for pharmacy acquisitions than almost any other SMB transaction, because of the DEA registration and PBM contract implications.

**Asset sale LOI language:**

*'Buyer proposes to acquire substantially all assets of Seller's pharmacy business, including equipment, fixtures, leasehold improvements, customer goodwill, trade name, pharmacy records (subject to applicable HIPAA requirements), vendor relationships, and all non-controlled substance inventory. Buyer shall not assume liabilities of Seller except specifically enumerated current-period trade payables not to exceed $[X]. Schedule II–V controlled substance inventory shall be handled pursuant to applicable DEA regulations and per the process described in Section [X] of this LOI.'*

**Stock sale LOI language:**

*'Buyer proposes to acquire 100% of the outstanding equity interests of [Pharmacy Entity Name], including all assets, licenses (DEA Registration No. [XXX], State Board of Pharmacy License No. [XXX]), and contracts. Seller represents that the entity holds all licenses in good standing and that no change of ownership notification to DEA or the State Board of Pharmacy has been filed or is pending. Buyer acknowledges it will conduct confirmatory diligence on all license transferability as a condition of close.'*

**The practical recommendation:** For pharmacies where more than 25% of script volume is controlled substances, push for a stock sale and negotiate around the liability risk (R&W insurance, expanded indemnification escrow). For pharmacies with modest controlled substance volume, an asset sale is cleaner.

DEA Transfer Contingency: The Essential Pharmacy Clause

Every pharmacy acquisition LOI must address DEA registration. A generic LOI that ignores this creates expensive confusion during closing.

**Recommended LOI language for asset sale:**

*'Buyer's obligation to close is conditioned upon Buyer's successful submission (not approval) of a new DEA Registration application prior to or simultaneously with close. Seller shall cooperate fully with Buyer's DEA application process, including providing all supporting documentation requested by the DEA and confirming inventory counts of Schedule II–V substances. From the date of close until Buyer's DEA registration is confirmed active, Buyer shall not dispense Schedule II–V controlled substances. Seller's DEA registration shall remain active through the date of close and shall be surrendered to the DEA within 5 business days following close. The parties acknowledge that the DEA registration gap may extend 45–90 days post-close and agree that this does not constitute a material breach of any representation or warranty.'*

**The financial protection clause:**

*'Seller shall escrow $[50,000–75,000] from proceeds at close, to be released to Seller upon Buyer's receipt of confirmed DEA Registration or upon 120 days from close, whichever is earlier. If Buyer cannot obtain DEA registration within 120 days through no fault of Seller, the escrow shall be released to Seller in full.'*

This structure protects the buyer if the DEA application hits unexpected complications while giving the seller certainty that they'll receive the escrowed funds within a defined timeframe.

Inventory Valuation: The Method and the Mechanics

Inventory is typically a separate transaction from the business purchase price. The LOI must specify the methodology to avoid close-day disputes.

**Recommended LOI language:**

*'Pharmacy inventory (excluding Schedule II–V controlled substances, which shall be handled per DEA regulations) shall be purchased by Buyer at Seller's actual cost of goods as reflected in the most recent wholesaler invoices. A physical inventory count shall be conducted by a mutually agreed third-party pharmacy inventory service within 48 hours prior to the closing date. The inventory purchase price shall be determined by the third-party count and paid by Buyer to Seller at closing in addition to the base purchase price. Inventory that is expired, within 90 days of expiration, or otherwise unsalable shall be excluded from the count and shall be Seller's responsibility to return to the wholesaler or dispose of at Seller's cost prior to close. Target inventory value is estimated at $[X]; actual payment is based on the third-party count.'*

**Schedule II–V controlled substance inventory:** This is handled entirely under DEA regulations. In an asset sale, the seller must either transfer controlled substances to another DEA registrant (another pharmacy or distributor), return them to the manufacturer or wholesaler under the DEA reverse distributor process, or destroy them under DEA supervision. The LOI should specify which method will be used and who bears the cost.

**Practical note:** For most asset sale pharmacy transactions, the seller transfers Schedule II–V inventory to a neighboring pharmacy or distributor in the weeks before close. The transfer proceeds are credited against the seller's costs or handled as a separate payment. Address this explicitly in your LOI so neither party is surprised.

Script Count Representations and Warranties

Script count is the primary value driver in pharmacy acquisitions. The LOI should include specific script count representations.

**Recommended LOI language:**

*'Seller represents that the pharmacy filled an average of [X] prescriptions per day during the trailing 12 months ending [date], based on pharmacy management system records. Seller shall provide Buyer with monthly prescription fill data for the trailing 36 months within 10 business days of LOI execution. Seller represents that no material change to prescription volume has occurred or is anticipated as a result of the proposed sale, and that Seller is not aware of any physician, clinic, or referral source relationship that is likely to change prescription volume by more than 10% following notification of the sale. If prescription volume at close is less than [90%] of the represented average, Buyer shall have the right to [renegotiate the purchase price / terminate the LOI with full deposit refund].'*

**The 90% threshold:** Set a specific floor on script count — if volume drops significantly before close (common if the community hears about the sale), you want a price adjustment right, not just a representation that turned out to be wrong. Sellers will resist this clause; the negotiating argument is that you're not penalizing them for normal variation, only for material volume loss.

PBM Contract Assignment and Staff Retention

PBM contract assignment and staff retention are two clauses that directly protect your revenue assumption post-close.

**PBM contract assignment language:**

*'Seller represents that all existing Pharmacy Benefit Manager contracts and preferred network agreements (the \'PBM Contracts\') are in full force and effect as of the LOI date, with no material modifications pending. Seller shall use commercially reasonable efforts to assign, transfer, or novate all PBM Contracts to Buyer's entity. In the event any PBM Contract cannot be assigned and must be renegotiated by Buyer, Seller shall provide Buyer with all relevant contract terms, performance metrics, and contact information to facilitate renegotiation. Seller shall not proactively notify any PBM of the pending ownership change prior to the close date without Buyer's written consent.'*

The last sentence is important. Premature PBM notification can trigger a network status review — and in some cases, a network renegotiation that disadvantages the buyer.

**Staff retention provisions:**

*'Seller acknowledges that key pharmacy staff (including all licensed pharmacists and pharmacy technicians) are essential to business continuity. Seller shall not, without Buyer's prior written consent, terminate any licensed pharmacist or pharmacy technician employment prior to close. Seller shall facilitate Buyer's ability to meet and interview key staff during the due diligence period. Buyer intends to offer employment to all current licensed staff at substantially similar compensation and title, subject to completion of standard background checks and employment verification.'*

For the complete pharmacy acquisition process from sourcing to close, see our pharmacy acquisition guide and pharmacy due diligence checklist.

Real Estate: Lease Assignment vs. Purchase Option

Where the pharmacy is located — owned or leased — materially affects deal structure. Address this explicitly in the LOI.

**Leased location (most common):** Require assignment or new lease as a condition of close. Review the existing lease for assignment restriction clauses — many commercial leases require landlord consent for change of ownership. Get landlord consent confirmed before signing the LOI, or make it an explicit condition. A pharmacy lease that can't be assigned is a deal killer.

**Recommended lease language in LOI:**

*'The purchase is contingent upon Buyer obtaining, within [30] days of LOI execution, either (a) assignment of Seller's existing lease agreement at 100% of current terms with no material modification, or (b) execution of a new lease agreement directly between Buyer and Landlord on terms acceptable to Buyer in its sole discretion. Seller shall provide Buyer with a copy of the existing lease within 5 business days of LOI execution and shall cooperate fully with any landlord consent process.'*

**Owned real estate:** If the seller owns the building, the LOI must address whether real estate is included in the purchase price or handled separately. Most buyers prefer to lease the real estate rather than purchase it — it preserves capital for the business acquisition. A seller who insists on selling the real estate as a package deal is adding complexity; a sale-leaseback structure (buyer acquires business assets, seller retains real estate and enters a market-rate lease with the buyer) can resolve this.

• Obtain copy of existing lease within 5 days of LOI execution
• Check for assignment restriction or change-of-control provisions in the lease
• Contact landlord before or immediately after LOI to confirm assignment appetite
• If real estate is owned, clarify in LOI whether it's included in the purchase price
• For sale-leaseback scenarios, include lease term length and rent rate in the LOI to avoid post-LOI disputes