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.