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Pharmacy owners looking to sell face ‘dilemma’ of cuts delay

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Potential sellers could be “damned if you do and damned if you don’t”, says Umesh Modi

Contractors planning to sell their pharmacy face a “dilemma” because of the delay to funding cuts, according to a finance expert.

Pharmacy minister owner David Mowat announced earlier this month (September 5) that the delay to the planned £170 million cut to funding in England – originally scheduled for October – was the “right decision”.

A week after Mr Mowat's address to the Royal Pharmaceutical Society’s annual conference, the Department of Health (DH) confirmed that a funding "package" for community pharmacy in England will be published in mid-October, and implemented in December.

Speaking before the DH's latest revelation, Umesh Modi, a partner at accountancy firm Silver Levene, said owners planning to sell their business “should probably proceed”.

But it would be a tough decision, as “no one has a crystal ball” and they could be “damned if you do and damned if you don’t”, he added.

“They might be tempted to wait for some clarity, in the hope that the cuts are withdrawn permanently and goodwill prices revert to the previously higher level,” he told C+D on September 6.

“On the other hand, if the cuts are even worse – although unlikely – then they will kick themselves for not selling out earlier,” he said.

First-time buyers will also be “put off by the lack of clarity on the funding issue”, Mr Modi stressed. “The banks will be careful in lending to them.”

However, he predicted that “there will always be buyers for good pharmacies”, as “the pharmacy business model remains robust, despite intermittent interference from the government”.

Both small and large multiples will “continue to acquire at the right price, as they have long-term objectives to meeting certain goals”, he said.

Many of Mr Modi’s clients had seen their “profits go down” since the announcement of the funding cuts last December, he said, as they are trapped in a “vicious cycle” of reducing staff and therefore suffering a loss of service revenue.

How to make the decision to sell:

Here are Mr Modi’s key questions which contractors should consider when deciding whether to sell:

  • Am I financially independent?
  • Do I still have children or elderly parents who are dependent on me?
  • Do I have good health? And am I able to continue working?
  • Do I still enjoy the work and serving patients in my community?
  • Do I have hobbies to see me through retirement?
  • What will I do with the proceeds of the sale?
  • Will the investment income be enough for my day-to-day expenses, without using up my capital?

Result

What action is your pharmacy taking now the funding cut has been delayed?
No action
22%
Investing in the business again
4%
Continuing to make savings in case the funding drop is confirmed
74%
Total votes: 172
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