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Southern comfort


Southern comfort

Why are people still looking to invest in the pharmacy sector? Mark page, director at Christie & Co, has the answer

Well, that’s the end of community pharmacy then. Or so the soothsayers would have you believe… Here at Christie & Co we’ve actually received a higher volume of enquiries and more buyer registrations since the announcement of the cuts back in December 2015, including for the south east of England.

Due to the cuts, most operators are now receiving reduced remuneration from the NHS. However, we still have 5,000 applicants registered as looking for pharmacy businesses, 3,478 of whom have highlighted the south east of the UK as a key location – including London, the Home Counties and East Anglia.

Three-fold answer
So why are people still looking to invest in the sector? The answer is fairly simple, albeit at least three fold:

• We work in a closed sector where the only realistic chance for pharmacists to run their own business is to acquire a going concern (ie, an established and trading pharmacy). There’s a natural draw from pharmacists to be their own boss and get into pharmacy ownership.

• The banks still have a strong appetite for the sector, with new lenders entering the marketplace all the time. Christie Finance, our sister company of commercial mortgage brokers, used over 20 different banks and finance institutions in 2016 to help fund pharmacy buyers’ acquisitions and that number is only set to rise.

• Mum and dad often help first-time buyers onto the ownership ladder with additional capital to assist with the purchase. This gives the banks even more comfort, as their clients are also responsible to their parents for making the business succeed. Locum demand But there’s more.

As a result of the cuts, many operators are looking to mitigate the reduced remuneration. One of the biggest expenses in a pharmacy is the pharmacist, and by cutting not only the hourly rate, but also the hours worked, many owners are seeing a considerable saving.

Indeed, while I’m writing this I’ve just seen that one of the big operators has announced a cull of Accredited Checking Technicians within their group. This is driving demand from locums to our door.

At its peak in 2016, nearly 80% of our registered 5,000 pharmacy purchasers were first-time buyers. We recently sold two pharmacies in Luton to first-time operators, both planning on running the businesses themselves. In terms of other recent sales in the south east, Christie & Co has overseen the sale of Nima Pharmacy, a group of two familyowned pharmacies located in the Surrey towns of Richmond and Stoneleigh. These were bought by a local operator who already owned one pharmacy and wished to expand.

Another pharmacy in Croydon also recently sold for above the asking price to another existing operator. Research from Christie & Co, which has involved speaking to banks, specialist lawyers and accountants as well as operators in the sector, suggests that the number of pharmacies that change hands each year is fewer than 250. This excludes the major deals that make the headlines – such as Co-op to Bestway and Sainsbury’s to Lloyds – but makes up the individual and small group sales of 1-30 pharmacies across the whole of the country.

So, even if we did see a huge surge of 10% more sellers, that’s still only 25 more businesses at best to satisfy a pool of 5,000 hungry buyers! Like any business, while supply is failing to meet the demand, we’ll continue to see stability in the market. Pharmacy is a transparent business that attracts the right kind of operatives.

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