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Irish Independent
Irish Independent
Samantha McCaughren Twitter Email

Pharmacy M&As on the increase as the post-pandemic dust settles

Pharmacies are again looking like attractive targets

After some fairly stagnant years, the pharmacy M&A market appears to be in rude health.

A number of buyers are seeking acquisitions, as demonstrated by Dublin-listed healthcare services group Uniphar, which is about to sign off on its buyout of the Sam McCauley chain of chemists from investment fund Carlyle Cardinal Ireland. 

As first reported in the Sunday Independent last year, the sale price is believed to have been around €50m – not far off the price originally paid by Carlyle Cardinal back in 2017.

The deal got the go-ahead from the Competition and Consumer Protection Commission (CCPC) on the basis that Uniphar sells off a number of rural chemists to allay “potential concerns about competition” in retail pharmacy. 

‘The end of last year and this coming year are probably as busy as we have ever seen’

There are 37 Sam McCauley chemists in total, and the outlets which must be divested are McHugh’s Allcare Pharmacy in Athy, Co Kildare; a Hickey’s Pharmacy in Navan, Co Meath; and McCauley’s Pharmacy in Bunclody, Co Wexford.

This purchase might suggest Uniphar is becoming a significant owner in the sector – but the market remains quite fragmented, with an estimated 1,900 outlets in the country.

On completion of the Sam McCauley deal, Uniphar will directly own 136 pharmacies. In total there are 481 pharmacies which have a relationship with the group though a franchise, a symbol agreement, while others are buying-group members. Uniphar brands include Allcare, Hickeys and Life pharmacies.

But Uniphar is not the only buyer in the market, with Boots and Irish-owned McCabes – which owns 28 outlets and plans to accelerate its expansion strategy – among those in acquisitive mode.

Stuart Fitzgerald of Fitzgerald Power accountants, which advises on the majority of deals in the pharmacy market, estimates that 30 transactions took place in 2022, which is on a par with pre-Covid levels.

However, he expects deals to be closer to 40 this year – up in the region of 20pc to 30pc.

“The end of last year and this coming year are probably as busy as we have ever seen it,” he said.

For a number of years, there was a gap between sellers’ expectations and what buyers were willing to pay, which slowed down activity.

“There was a period where there was a bit of uncertainty around State payments for medicines, which made it difficult to assess long-term earning potential — but that’s been fairly static for the last couple of years.

“It means people can at least take a realistic long-term view what the potential of the asset is,” said Fitzgerald. “That is giving people confidence.”

Multiples are now in the five to six times EBITDA range, with location and opportunity for growth among the factors potentially pushing that higher. Multiples had been closer to four a number of years ago.

“Based on the pipeline, it is going to be one of the busiest years.”

​Anecdotally, some business owners made the decision to sell up following Covid – particularly SMEs, who felt the rollercoaster of the past three years was more than they could handle.

‘The number one reason people cite for selling up is burnout’

According to Fitzgerald, this is a key motivator for independent pharmacy owners to exit the business.

“Pharmacy felt it more than any other sector, they went through an extraordinarily difficult period,” he says of the pandemic and lockdowns.

“It’s easy to forget, looking back, but it was stressful on the front line – dealing with staff illnesses, being worried about infection – all of that.”

The pressure was on again over the last couple of months with the RSV outbreak, flu and Covid, in addition to the shortages of medicines such as cough bottles, steroids, and certain antibiotics.

With the worst of Covid hopefully behind us, however, another problem has emerged – staff shortages.

Fitzgerald said these factors had left pharmacists “really, really jaded".

“The number one reason people cite for selling up is burnout,” he said.

A feature of this is that younger owners are getting out of the market.

“They are in their late 40s early 50s, and they would typically be 10 years away from selling their business,” said Fitzgerald.

This may be a passing trend, or it may endure after the worst of the pandemic fades from memory. For now though, it appears that the pharmacy groups may be better able to deal with some of the problems which have worn down some independents.

Ireland’s market may remain fragmented for the foreseeable future – but it looks as though a pick-up in transactions is underway.

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