Medici Capital's Frank Sirianni discussed at this year's APP Conference that research by Medici Capital has indicated that the level of pharmacy sales is at around 40% of what it was a number of years ago - resulting in limited opportunities becoming available on the market. However, the prices being paid for pharmacies have not pegged back.
Despite the reduction in active banks providing capital to pharmacy, and the concern that new owners have an inability to pay for pharmacies, prices paid for pharmacies are holding up. As it stands, the average yield rates for pharmacies sold throughout Australia is approx 16% - including both metropolitan and rural locations. Taking into account that metropolitan pharmacies traditionally sell for much lower yields than rural pharmacies, it is apparent that pharmacies are being sold in capital cities at yields of less than 14%.
Commentary has grown in recent months from buyers questioning the prices of pharmacies being transacted. Many comment that prices being paid for pharmacies are too high.
With Pharmacy Approval Numbers transacting at $500,000 plus GST in the current market, (this does not include goodwill, stock or fixtures & fittings), when combining just the intangible assets, many pharmacies are valued at a minimum of well over $1.0 million - simply on asset realisation/liquidation values. Accordingly new purchasers should be advised that a marginally profitable pharmacy is likely to sell for around $1.5 million - with those earning substantial profits likely to go for much higher values.
The current environment for pharmacy sales indicates that it is still a seller's market. Buyer's looking to purchase a pharmacy should be aware that if they wish to purchase a pharmacy, they gain an understanding of the current environment and consult with industry experts who understand pharmacy. With many buyers competing to purchase a pharmacy, those who indicate that they do not have an understanding of the current market will be left behind.
For more information about the performance of pharmacy, Medici Capital has a number of tools available. Ask An Expert is a knowledge base for pharmacy - have a look for your answer; if it's not there, Ask An Expert and we'll answer it for FREE. In addition, Medici Capital has launched a new service - Pharmacy Industry Data. The tool provides an overview of pharmacy performance over the 2010 calendar year and is a good guide for understanding pharmacy performance in the market. The site is available at http://www.medici.com.au/industry-data.
When looking to ascertain the value of a pharmacy, Medici Capital provides an online valuation tool to assess the Indicative Value of the pharmacy. For more information about performing an Indicative Value on a pharmacy, visit: http://express.medici.com.au.
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