We’re now in the final quarter of the 2018 calendar year, and Natalie Sirianni reviews and assesses the year to date in terms of pharmacy business sales
It has been a very active and robust pharmacy market throughout Australia during the year. This follows on from the trend of 2017, which was the most active market I have seen in my time in pharmacy brokerage.
It will be interesting to see how 2018 compares to 2017 once all is said and done.
So, what’s causing this active market? Here are some of the factors currently affecting the pharmacy business sales market:
We are witnessing an increased supply of pharmacies on the market compared to two years ago. Many of the sales we are currently completing are vendor retirements or downsizing. This likely has to do with the demographics of current pharmacy owners. As many of the owners reach retirement age, we are likely to see strong levels of supply for pharmacy business sales and/or partnership opportunities in the foreseeable future. However, during the Community Pharmacy Agreement negotiations we often see some vendors delay selling their pharmacies.
We are also witnessing very strong demand levels from buyers throughout Australia. We have strong demand from a number of subsets in the market from first time buyers, to current pharmacy owners, to larger groups and consolidators. While demand does vary based on the location and characteristics of the individual pharmacy, overall, demand continues to outweigh supply.
- Access to Finance
The banks, in general, have been providing good access to finance for pharmacy owners and buyers throughout Australia. Each transaction and finance application will be assessed on a case by case basis on its merits, however overall, the buyers we have dealt with are having success with their finance applications. It will be interesting to see if there is any impact from the recent Royal Banking Commission.
- Market Sentiment
Overall market sentiment is currently relatively positive. While buyers are aware of the risks of pharmacy moving forward, overall market sentiment is positive and the market is indicating that it believes the business assets are priced correctly.
- Community Pharmacy Agreement
We are now over half way through the 6th Community Pharmacy Agreement. As with all of the CPAs, the 6CPA has provided certainty to the Government and Pharmacy Owners about remuneration and other items. The market reaction to the signing of the 6CPA was positive and continues to be so. Once the negotiations for the 7th Community Pharmacy Agreement commence, we may see a reduction in the number of pharmacies on the market.
- Codeine Reschedule
We did not experience much impact on the pharmacy market in 2018 due to the codeine reschedule, notwithstanding the financial impact.
- Changes to the Pharmacy Location Rules
There has been no initial impact on the pharmacy market from the recent changes to the Pharmacy Location Rules. It is still very early days and only time will tell how these changes may impact on the market moving forward. In general, I consider the changes to be positive to pharmacy and therefore the market. Individual pharmacy locations will be impacted differently based on whichever rules apply to the specific location.
As you can see, there are many factors influencing the pharmacy market at the moment. These factors are however all general in nature and the demand for an individual pharmacy will vary based on the specific characteristics of the business.
Natalie Sirianni is director of Attain Business Brokers – if you are considering selling your pharmacy call one of their brokers on 1300 ATTAIN (288 246) to discuss the market in your area.
If you are looking to buy a pharmacy, let us know what you are looking for so we can keep you posted of new opportunities.