Irish Pharmacy Sector M&A Review 2023 – White PaperWelcome to our review of the Irish Pharmacy Sector M&A for 2023. This report highlights the key findings from the comprehensive white paper prepared by Fitzgerald Power, offering insights into the sector’s transactions, valuations, market dynamics, and labour considerations.Download the white paper.White Paper OverviewOverview of Transactions.From Q1 2021 to Q4 2023, the Irish pharmacy sector saw 95 transactions, with Fitzgerald Power advising on 51 of these deals. The analysis focused on single-unit pharmacy transactions and small pharmacy groups (up to four units), excluding larger group sales.Valuation Multiples.Valuation multiples, which measure the price paid relative to the pharmacy’s earnings, averaged 4.78x EBITDA over the review period. This varied with the size of the pharmacy:Pharmacies with turnover less than €1 million had an average multiple of 3.81x.Pharmacies with turnover between €1 million and €1.5 million saw a multiple of 4.61x.Pharmacies earning between €1.5 million and €2 million achieved 5.02x.The highest multiples, averaging 5.90x, were for pharmacies with turnover above €2 million.Geographically, Dublin pharmacies commanded the highest multiples, reflecting regional economic conditions and market dynamics.Market Dynamics.The number of pharmacies fluctuated during the review period, peaking at 1,913 in Q1 2023 and dipping to 1,894 in Q1 2021. Despite a net increase to 1,909 pharmacies by the end of 2023, the high failure rate of new openings highlights challenges in achieving sustainable operations and successful ownership transitions.Labour Market Challenges.Labour market conditions significantly impacted the sector. Key issues included:A shortage of qualified staff, prompting some pharmacy owners to sell earlier than planned.A shift towards work-life balance among employees, leading to a rise in locum pharmacists and consequent staffing instability.Wage inflation, with supervising pharmacists’ hourly rates increasing by 17% from 2021 to 2023, impacting both operational costs and valuation metrics.Additionally, new labour policies, including pension auto-enrolment and minimum wage hikes, have further influenced operational costs and market conditions.Buyer Insights.Independent operators and pharmacy groups were the primary buyers, with groups particularly active in acquiring larger, higher-revenue pharmacies. Independents achieved an average valuation multiple of 4.67x, while groups saw slightly higher multiples at 4.93x.Conclusion.The pharmacy sector has faced significant challenges over the past three years, but conditions are improving with lower inflation and better labour supply. Fitzgerald Power’s corporate finance team has seen a surge in market activity in Q1 2024, with increased enquiries and prospective buyers. Major consolidations like Phoenix’s purchase of McCabes and Uniphar’s acquisitions are set to continue. Hybrid deal transactions are expected to rise, aiding first-time buyers. However, government policies on pensions, wages, and payroll taxes will impact future profits and valuations.Read the full white paper here for more in-depth insights and analysis.Our team is dedicated to providing you and your business with the absolute best financial advice out there. We approach each and every case from a fresh perspective, working with you to find tailored solutions that leave your business feeling stronger than ever. With our expert analysis, we translate figures into a language you can understand. Using timely, reliable advice, our experienced team of experts devise sophisticated plans to encourage cost efficiency and growth. If you would like to discuss this research, contact our team at Fitzgerald Power today.Further Articles Pharmacy Pulse Report Q4 2023Analysis of the key trends in the Irish Community Pharmacy sector, prepared by Fitzgerald Power on a quarterly basis. Read Blog Pharmacy Pulse Report Q1 2024Analysis of the key trends in the Irish Community Pharmacy sector, prepared by Fitzgerald Power on a quarterly basis. Read Blog
