Despite the sector facing significant challenges in 2017, the market in 2018 is looking pretty robust, says Tony Evans, head of pharmacy at Christie & Co.
Throughout 2017, the pharmacy market endured the imposition of unwelcome funding cuts, quickly followed by the announcement of the £180 million Category M clawback, further compounded by the cashflow squeeze, drug shortages and generic price rises. While some pharmacists sought to exit the sector, choosing to accelerate their retirement plans, this has presented many with the opportunity of pharmacy ownership. Indeed, in 2017, we saw a 21% increase in pharmacies coming to market. So, how is the pharmacy market currently faring?
The beginning of a new year typically brings an increase in instructions, and this trend has not only continued into 2018, but is significantly up on the same period last year, with over 30 new instructions in the first two months! Our activity demonstrates that buyer appetite has been largely unaffected by this influx of instructions, with sales processes often continuing to result in competitive bidding and premium prices.
Increase in volume
The volume of deals has also increased beyond those witnessed in the same period last year but, interestingly, now includes more independent sales rather than the multiple/corporate sales we saw previously. In the past three months, we have seen our applicant database grow by a further 3%, over and above the 18% we saw over the prior 12 months, underpinning the long- term confidence in the pharmacy sector’s role in the future of primary care.
From speaking to existing independent and regional multiple operators weathering the funding cuts and cashflow challenges of the past few months, many operators remain cautiously optimistic about the long- term prospects of the sector, emphasised by their continuing appetite to acquire.
Banks remain supportive and while some may be more discerning in their approach, challenger banks have also entered the market, offering new and alternative opportunities for borrowing.
Such has been the interest in the sector that our sister company, Christie Finance, has witnessed a 25% increase in the number of pharmacy acquisitions and refinancing it has undertaken in the past year. From a wider point of view, such has been the strength in the appetite for business lending that they received offers of finance from over 50 different banks and lenders.
Christie & Co remains confident in the pharmacy sector, which has shown its resilience, despite funding and operational challenges. From a market perspective, our view remains that comfort lies on both sides of the transaction. From a vendor’s point of view, pharmacy values continue to hold up to the funding cuts and category M impacts, while from a purchaser’s point of view, the increase in pharmacies coming to market provides more opportunities to invest in the sector.