So far this year, the Scottish pharmacy market has been largely centred around the significant disposal of a large number of corporate assets. The number of pharmacies entering the market at one time is unprecedented and has certainly had an impact on activity levels.
To date, we’ve valued 48 of the corporate assets for sale in Scotland for a whole host of differing buyers, ranging from established groups to first-time buyers. It’s going to be really interesting to observe the impact that these disposals will have on the market over the next six to 18 months.
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With so many of these corporate settings being divested at once, the prices that we have seen appear to be very attractive for buyers, albeit they seem to reflect allowances for decreasing prescription levels and high locum costs in some areas, as well as legacy property issues, strict deadlines and deposits required for completion.
Historically, the market had been used to low volumes of stock, which as a result generated strong competition and high prices. This often pushed first-time buyers and smaller operators out of the running. However, the volume of stock recently available as a result of corporate disposals has enabled all purchaser types, whether experienced operators or first-time buyers, the chance to pick up pharmacies at a significant discount to normal market price parameters.
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Many of the assets appear to have also been effectively run by locums over the past 12 to 18 months, which isn’t an ideal environment for staff or for a growing business. This presents the opportunity for new buyers to improve the profitability of the businesses by employing full-time pharmacists or running the branches themselves as owner-operators.
With a more hands-on approach, or by becoming part of an established small to large-sized independent Scottish group, it is also hoped that this will only be good for staff morale and present opportunities that may not previously have been available under corporate ownership.
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With many sales now reaching completion, it’s likely that there will be a period of consolidation as owners take stock, but I’m confident that appetite will return again.
In the next 12 to 18 months, we’re likely to see a couple of things. Some of these disposals may well come back to the market again after those who acquired them have turned them around – improving the value of the asset – and look to sell to make a profit.
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Secondly, the pool of potential buyers in the market will have increased, with previous first-time buyers now having their first asset and looking to buy numbers two and three, and so on, from a more solid footing. Those who acquired several settings will also likely have a significant level of equity to release to fund further purchases.
The first half of 2023 has certainly been unique but, once the dust settles and the headaches of getting to completion are forgotten, hopefully, this will be seen as a breath of fresh air for the market.
Jamie Savage is director of healthcare and medical valuation at Christie & Co