Is the future looking more certain?


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What does the 7CPA mean for the pharmacy business sales market? Natalie Sirianni provides the latest update

Now that we are in the new financial year, the Seventh Community Pharmacy Agreement (7CPA) has commenced.

As we are all aware the 7CPA took almost 12 months to negotiate between the Federal Government and the Pharmacy Guild, during the challenging times of the bushfires earlier this year and then COVID-19.

It was a great outcome to see that this was signed prior to the expiry of the 6th agreement and no doubt a huge amount of work for everyone involved.

The inclusions of the 7CPA have been well documented, so in this article I will cover the likely impact on the pharmacy business sales market.

A major outcome, from a business investment point of view, is certainty. The signing of the 7CPA (and every previous CPA) has provided certainty to community pharmacy throughout Australia for the next 5 years of operations.

Historically, this certainty has impacted on the pharmacy business market in the following ways:

  • Increased Supply of Pharmacies on the Market – generally, once each CPA gets signed, we see an increase of the number of pharmacies on the market. This is because a number of owners who are considering selling wait for the CPA to get signed before listing their business for sale. So far, since the 7CPA has been signed, we have already experienced increased enquiries from owners considering selling their pharmacies.
  • Increased Buyer Confidence – the certainty provided by the signing of the 7CPA is also likely to bring increased confidence to buyers and also increase the number of buyers in the market. This increases demand in the pharmacy business sales market. The rumours as to what may have been included in the 7CPA made many buyers cautious. We are already seeing indications of this with more buyer enquiry since the 7CPA has been signed.
  • Increased Confidence from Banks – access to capital and finance is a key factor that impacts on the pharmacy business sales market. Generally, most pharmacy buyers use bank finance to fund part of their purchase, so the banks’ sentiment and appetite towards pharmacy lending is a critical component to the pharmacy business sales market. The certainty provided with the 7CPA is likely to impact on this positively.

 

Obviously, this is all occurring with a backdrop of the coronavirus pandemic. While there will be long term economic impacts from this, pharmacy has been relatively sheltered from considerable impact (depending on your location), as it is an essential health service that will continue to operate throughout.

Historically, the data also shows that pharmacy does relatively well during economic downturns. There is a lot of cover around the economic impacts of COVID-19, so I will leave this to my next article.

In summary, the 7CPA has provided certainty to community pharmacy and will therefore likely cause an increase in both supply and demand in the pharmacy business sales market.

The pharmacy market is quite strong at the moment, and will likely continue that way moving forward.

If you have any questions about the pharmacy market in your area, or the likely sale price of your pharmacy, please feel free to contact me at any time on 1300 ATTAIN (288 246). I look forward to discussing with you further!

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