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Demand for pharmacies outstrips supply, as new buyers increase by 57%

Hutchings Consultants: Many buyers are prepared to pay a premium price for a suitable pharmacy

The number of new buyers looking to own pharmacies in England increased 56.9% in the 12 months to March 2021, compared to the previous year, brokers Hutchings Consultants has said.

The pharmacy market in England has remained “very active” despite increased workplace pressures brought on by the COVID-19 pandemic, with “buyer demand [now] outstripping the supply of pharmacies for sale”, Hutchings Consultants said in its latest market report, published last week (May 14).

The trend of multiples such as Lloydspharmacy and Boots selling large numbers of branches “appears to have run its course for the time being” and many owners who otherwise would have sold in the last 12 months have chosen to put their plans on hold, resulting in a reduction in the number of pharmacies coming to market, Hutchings Consultants said.

Meanwhile, there is an increased confidence in the pharmacy market in England prompted by the "stability" offered by the five-year funding contract and sector’s “crucial role in providing healthcare during the pandemic”, the brokers added.

“This imbalance in supply and demand has led to an encouraging improvement in average goodwill prices attained by those in a position to sell,” Hutchings Consultants said.

Paying premium prices for fewer pharmacies

“As with recent years, the new registrations have been principally led by enthusiastic first-time buyers, however we have also seen an increase in other categories of buyers such as investors and existing pharmacy owners looking to add to their portfolios,” it added, pointing to Avicenna’s recent acquisitions and PCT Healthcare’s merger with Murrays Pharmacy.

“Many of these buyers are prepared to pay a premium price for a pharmacy if it is a cohesive fit for their growing group,” Hutchings Consultants said.

Securing a long-term future

David Brewer, managing director of pharmacy finance brokers FTA Finance, said many of the first-time buyers have sought security in their long-term future by becoming pharmacy owners.

“The demand from first-time buyers has been driven by their poor experience during the first lockdown in 2020. A sizable number were furloughed and those who were self-employed struggled to access government grants and loans,” he suggested.

Meanwhile, Hutchings Consultants anticipates an increase in the number of pharmacies coming to market in the next 12 months, “as we hopefully return to some normality in our lives and the wider economic outlook starts to improve”.

Any rapid increase in the number of pharmacies up for sale – such as if the rumoured Lloydspharmacy divestments come to fruition – will impact branch sale prices, it said.

However, “in the immediate short-term, while the lack of quality pharmacies for sale continues, we anticipate a further stabilisation, if not a further increase in goodwill values,” Hutchings Consultants concluded.

7 Comments
Question: 
Have you bought or sold a pharmacy in the past 12 months?

Charles Beadle, Locum pharmacist

Some excessively cynical replies here! I am much towards my swan song as a Pharmacist, but I think there’s some decent opportunities around. We are seeing much more how inflexible and/or bureaucratic larger companies are struggling in the Pharmacy arena, far too inflexible to respond to local needs. It’s encouraging that finance is highly available on good terms to buy pharmacies. However extremely unpredictable how NHS services will be in 20 years time. I still see the majority of pharmaceutical provision remaining local and don’t see Pharmacy2u and Amazon replacing this. 

R A, Community pharmacist

Well we all know how Lloyds Pharmacy acquisition of Sainsbury's Pharmacy worked out.

Anonymous Anonymous, Information Technology

Who on earth is buying a pharmacy in this day and age??? I'm entrepreneurial but you'd need your head checking to take out a half million pound loan in the hope that the NHS won't alter the current (poor) payment arrangements to make them even worse!!! It is literally financial suicide - why do you think all of the big chains are selling up??!?

jag bains, Superintendent Pharmacist

Bite the bullet

 

A.S. Singh, Community pharmacist

“As with recent years, the new registrations have been principally led by enthusiastic first-time buyers"

Naive first time buyers, normally bankrolled by mum and dad buying low GP pharmacies will get the shock of their life when they realise GP does not equal NP. 

The way pharmacies are funded, it is very difficult to make significant profit especially on low turnover pharmacies. They will soon find out

Farmer Cyst, Community pharmacist

There are some proper nutters out there - buying a community pharmacy.

 

Stay safe everyone. 

Kevin Western, Community pharmacist

By my maths that could be as low as 7 possible buyers, gone up to 11..hardly staggering,

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