What’s the current situation with the pharmacy market? Natalie Sirianni provides the first update for 2020
As a Pharmacy Business Broker, the question I get asked most often is: “How is the pharmacy market tracking?”
Overall, 2019 was quite a strong year for the pharmacy business sales market with a good number of sales transacted and overall prices remaining strong. We are witnessing high levels of buyer demand, which is above the level of supply of businesses on the market.
However, the market does vary by location, state and type of business.
So, what’s in store for the market during 2020?
The market performance this year could vary depending on a number of factors, but I believe that the two key factors on the horizon that may impact on the pharmacy business sales market are the Seventh Community Pharmacy Agreement (7CPA) negotiations and access to capital for buyers. Let’s explore each of these.
- Seventh Community Pharmacy Agreement (7CPA)
As we all know, the negotiations for the 7CPA are currently taking place between the Federal Government and the Pharmacy Guild. While early indications from the Government were that they wanted it completed by the end of 2019, we are now obviously past this time. The signing of the CPAs has historically always provided a boost to the pharmacy business sales market, as it provides certainty for pharmacy for the next 5 years. The outcomes from the agreement are also likely to impact on the pharmacy business sales market. However, we won’t know how they will impact until we have details of what has been negotiated.
- Access to Capital
Availability of finance or access to capital is a key factor that influences the pharmacy business sales market. This is particularly the case for the larger pharmacies. Pharmacy has historically been very well regarded by the banks and therefore access to capital for pharmacy business purchases has been very good. There was some concern that the Banking Royal Commission might impact on this (across all industries), but we have not seen any significant impact. Overall, availability of finance for pharmacy purchasers has been very good and the low interest rates are meaning that the cost of capital is also very low.
We will continue to monitor these factors, and others that impact on the pharmacy market.
If you have any questions about the pharmacy business sales market or your pharmacy in particular, please feel free to contact me to discuss on 1300 ATTAIN (288 246). I look forward to discussing with you further!
If you are considering buying a pharmacy and would like to learn more about the pharmacy market, the Pharmacy Ownership Ready Conference is being held in Melbourne in May and is a must attend event for any prospective pharmacy owner. The conference will include a range of sessions on how to buy a good pharmacy at a great price, understanding financial statements, valuation principles, legal factors, partnerships and much much more! I look forward to seeing you there!