Multiples offloading branches is ‘positive’, pharmacy broker says
Corporate branch disposals are “positive” as they will result in “more pharmacies coming back into the independent sector”, Christie & Co’s head of pharmacy has suggested.
Christie & Co’s head of pharmacy, Tony Evans, spoke to C+D immediately following Lloydspharmacy’s announcement last week (January 19) that it would withdraw operations from Sainsbury’s pharmacies “over the course of 2023”.
He suggested that the multiple’s latest move underlines Christie & Co’s view that “larger operators” – including corporate operators and “larger multiples” – will be “looking at their estates in light of the cost challenges that they're continuing to see”.
These will lead corporates and multiples to consider “ongoing disposals of marginal or non-performing sites”, Mr Evans explained.
Pharmacy bodies last week suggested that Lloydspharmacy’s exit from Sainsbury’s heralded further community pharmacy closures.
However, Mr Evans said corporate disposals were “something positive from [his] point of view”.
“Where we've seen corporate disposals come to market, there has always been a ready pool of independent operators or first-time buyers who wanted to acquire,” he told C+D.
“There always seems to be a ready supply of operators looking at those opportunities, whether they look to consolidate those units into their existing businesses, or they run them as an additional pharmacy operation”, he said.
“I think it's something positive from my point of view - it's more pharmacies coming back into the independent sector and not holding corporate estates”, he added.
Independents have greater flexibility
While corporate-owned pharmacies are usually managed under a “fairly strict…operational structure”, independents and first-time pharmacy buyers “can flex far more easily and quickly and adapt to local patient needs”, he continued.
When buying up corporate disposals, independent operators have the chance to “develop the service offering that they can provide” to patients and “offer a wider range of potentially locally commissioned services”, Mr Evans noted.
Independents also “understand their patient needs more”, eliciting “local confidence” from their patients, he said.
Independents scoop up corporate disposals
However, Mr Evans noted that recently, where Christie & Co has “been involved in corporate sales, there have been more sales to independent contractors, rather than first-time buyers”.
This is because “corporate disposals aren't necessarily without their challenges”, especially when it comes to negotiating new leases and funding purchases, he explained.
“If you've got an independent contractor who's already got established funding principles with a bank and a relationship with a bank, more often than not, that is an easier deal to do than with a first-time buyer,” Mr Evans added.
This pattern applies more widely to the community pharmacy sector, he noted, pointing Christie & Co’s latest business outlook report, which stated that sale conditions and liabilities involved may make it “challenging” for anyone new to the market looking to acquire a pharmacy business or those “reliant on funding to support acquisitions”.
Mr Evans said that although 80% of those on the broker’s database interested in acquiring a pharmacy are first-time buyers, “only 23% of the deals that we've actually done over 2022” went to this group.
But “there are some very strong first-time buyers out there,” he hastened to point out.
Senior director at Christie finance David Ward echoed Mr Evans, saying: “I don't think there's a shortage of appetite from the first [or] second time buyers, but they are restricted because of the scenario.”