Whilst the North West transactional market continues to show impressive signs of recovery, the healthcare sector has also benefited from both increased consumer confidence and an appetite for growth. One of the most buoyant healthcare sub-sectors is pharmacies.
Healthcare has always been seen as a stable sector with good access to finance and healthy EBITDA multiples. As a result, 2015 – and the first quarter of 2016 – has witnessed a substantial spike in demand for all types of pharmacies. An interesting and underlying trend is around the emergence of first time buyers which are easily outstripping supply.
For the calendar year 2015, such new players accounted for around 80% of the market. However, institutional buyers are still prominent with Lloyds Pharmacy’s acquisition of Sainsburys’ holding of 200 in-store outlets being expected to complete at the time of writing.
This competition has – of course – led to enhanced sale prices and these trends look set to continue throughout 2016 and into 2017. A cautionary note relates to the anticipated increase in borrowing/interest rates. Nonetheless, with mainstream lenders remaining competitive and the usual turnover of retiring operators benefiting from enhanced returns, the outlook is bright in this industry.
Pharmacy Acquisitions – Headline Issues
Pharmacies still largely continue to be acquired by way of asset purchases with share purchases slightly less common. Whilst the basic legal requirements for a business purchase apply, pharmacy purchases are subject to specialised regulatory requirements that require detailed consideration.
In particular, any pharmacy must be registered in accordance with the regulations prescribed by the General Pharmaceutical Council (GPC). On any sale and purchase, the acquirer must notify the GPC of the relevant change in ownership. There may also be additional prescribed procedures where a first time acquirer needs to nominate a Superintendent Pharmacist in accordance with existing legislation.
Along with the strict regime of the Transfer Of Undertakings (Protection of Employment) Regulations 2006 (TUPE) regarding employees, the deferred nature of income streams from the relevant regulator pursuant to FP34 Statements means it is important that any acquirer benefits from a robustly drafted Asset Purchase Agreement.
As ever, specialist professional guidance should always be taken in the area of pharmacy acquisitions. We offer bespoke advice on all areas of this healthcare sub-sector.
For more information about Sonio and his work, please visit https://www.dbf-law.co.uk/our-people/sonio-singh/.