The consolidation trend in the sector is set to continue as pharmacies face increasing operational costs
Pharmacy acquisitions in the UK have surged, with financial challenges within the sector fueling an increase in mergers and acquisitions (M&A).
According to data from national accountancy firm UHY Hacker Young, 1,212 pharmacies were acquired in the 12 months ending June 30, 2024—an increase of 50 per cent from 809 in 2023.
Nearly 9 per cent of all pharmacies were acquired in M&A deals, with transactions including part of the sale of Lloyds Pharmacies' entire portfolio of 1,054 community pharmacies.
John Ierston, Partner at UHY Hacker Young, attributes the rise in acquisitions to the growing financial strain on pharmacies.
He points to the NHS contract becoming less favourable for pharmacies and the ongoing cost-of-living crisis, which has driven up operational costs.
UHY Hacker Young's benchmarking research also revealed a 10 per cent drop in gross profits per pharmacy, from £419,598 per year to £382,468. With over 13,000 pharmacies across the UK, this decrease equates to a £500 million loss in profits for the retail pharmacy industry over the past year.
lerston predicts that the pace of mergers and acquisitions will continue as financial pressures persist
He said: “It has been an increasingly tough year for retail pharmacies and their patients as profits fall and sites are forced to close. It looks likely that the consolidation, that the sector has seen over recent years, will continue.
“This rise in M&A activity shows that being an independent pharmacy is increasingly difficult. Lower gross margins under the NHS contract and rising wage costs due to the cost-of-living crisis, changes in Minimum Wages and National Insurance rates are squeezing margins.”
Some pharmacy owners are choosing to exit the industry, while others are acquiring more sites to boost profitability by creating greater economies of scale.
Merging with other pharmacies helps eliminate duplicated back-office functions and improves their negotiating powers when making purchases.
