Pharmacy takeovers are up 95 per cent in the last year as large chain buy-outs drive the trend for consolidation, law firm Hugh James reports.
With 1294 acquisitions made in 2015/2016, pharmacy purchases have risen 230 per cent since 2011/12 when there were just 392 acquisitions made and almost doubled since the purchase of 664 in 2014/15.
The pharmaceutical sector is traditionally fragmented, but many pharmacy groups are now acquiring smaller competitors or merging to match the economies of scale accomplished by Walgreens Boots Alliance.
Recent notable transactions include LloydsPharmacy's £125m takeover of 270 Sainsbury's pharmacies and the £160m of funding secured by Day Lewis Group to increase the number of its sites from 277 to 400 by 2021.
In a sector where branding and advertising has traditionally been the domain of only the biggest chains, the increased budgets of the newly merged companies will allow the pharmacies to invest more into their brands.
Greg Williams, a partner at Hugh James, says: “Pharmacy M&A activity has continued at a very healthy rate – despite the various challenges faced by the sector.”
Increased scale among pharmacy groups will make it easier for them to offer services, such as STD screenings and support to stop smoking, which generate revenue from the NHS. This comes after the government announced its plans to cut budgets for community pharmacies by 4 per cent year-on-year to £113m, as part of a two year reduced funding package.
“As the Government looks to make savings on its funding to pharmacies, those looking to receive extra financing from the NHS are having to offer additional services to secure this. That increased operational risk is best spread across a bigger group of outlets,” said Williams.