Buyer Frustrations:
Daily, I’m talking to multiple pharmacists, some looking to sell and even more looking to buy. Most pharmacists understand that it is a seller’s market, and if they are buying, they will probably have to pay a premium to secure the right pharmacy. What is most frustrating for so many buyers is they don’t get the chance to compete for some opportunities due to off-market sales. Therefore, I have a lot of buyers asking me what we have off-market.
What Is an Off-Market Sale?
An off-market sale is one where a pharmacy changes hands without being made available to a broad pool of interested buyers.
Reasons For Off-Market Transactions:
There are multiple reasons for off-market transactions. Here are the 3 main ones:
- The owner wants a quick quiet sale and thinks a traditional sales process will take longer than selling off-market. (if a listing is well prepared the sale process is not actually the time-consuming part, getting to settlement can be harder and takes longer).
- The approaching buyer wants to secure the pharmacy at a price they want to pay, not what they can afford to pay. So, they try to avoid competition – which is what drives up prices.
- An introducing party, like a wholesaler, gets to secure or maintain the business within their portfolio.
So, what does this mean to each person in the market?
Vendors:
- When a pharmacy sells off-market, the vendor almost always leaves money on the table.
- Across hundreds of pharmacy sales, the pattern is consistent: competition between buyers drives sale prices well beyond what any single offer, made in isolation, would achieve.
- A vendor who accepts a private approach without testing the wider market is potentially handing the buyer a discount funded by their own lack of information.
Buyers:
- The successful buyer who secures a deal off-market is happy as they have enjoyed more control in the transaction than they would normally have. They are motivated by the prospect of securing a business without having to stretch their resources.
- Their opening offer reflects what the successful buyer is comfortable paying when there is no pressure on them. Put that same buyer into an open campaign alongside several other qualified, motivated pharmacists, and the outcome is almost always different.
- Other buyers are disappointed as they have researched their borrowing capacity, reviewed the market to understand what the true cost of their preferred business is, and they have possibly collaborated with other pharmacists creating a team to work together to realise their goal.
- When the other buyers find that a pharmacy that they would have competed for go without being aware of the opportunity, they are genuinely annoyed and frustrated.
- There are several groups with access to multiple brands. They can apply one of these brands to suit the situation. Therefore, they will compete for nearly every pharmacy available, and these groups hate missing out on opportunities.
The Current Market:
Currently there are fewer listings available when compared with buyer demand. This creates competitive tension that drives prices upward. Removal of that competitive tension through an off-market arrangement, usually transfers the financial benefit towards the buyer.
This is the reality of off-market sales, and for vendors, it raises a question: if that many motivated, financially ready buyers missed out on seeing the opportunity, what does that say about the price achieved?
So Why Is There No Shortage of Buyers?
The pharmacy market in Australia has a genuinely strong and active buyer pool right now. Pharmacies are widely regarded as a resilient investment. More pharmacists than ever are looking to become multi-site owners, partnering with younger pharmacists who are looking to get into ownership and are happy to work as junior partners.
At AP Group we currently have 6000+ qualified pharmacists in our database actively looking for the right opportunity. Many of them have their finance in order, their criteria clearly defined and are ready to move quickly when the right business comes up.
This is good news for vendors, because the demand from buyers is already there and the buyers are wanting to have opportunities presented to them. The question is simply, how many of those buyers will get the chance to see your business and compete for it when you go to market?
Maintaining Confidentiality & Discretion
Discretion does not mean you have to sell secretly.
One of the understandable concerns vendors raise is confidentiality. The last thing most pharmacy owners want is for staff, customers or competitors to learn the business is for sale before the time is right. It is a fair concern, and it is one that a well-run campaign should address.
Running a broad, competitive campaign and maintaining discretion are not in conflict. A properly managed process, such as the Data Room we have developed at AP Group restricts access to verified, qualified buyers only. Sensitive financial information is housed securely, not circulated freely. The flow of information is controlled at every stage. The difference between a good campaign and a bad one is not how many people are told the business is for sale; it is how carefully those people are vetted, when they have access to information and for how long.
What to Ask Your Broker
If you are considering a sale and have had a direct approach, or if a broker is recommending a quiet arrangement, it is worth asking some direct questions:
- How many registered buyers will have access to this listing?
- Will this be an open, competitive campaign?
- What steps are in place to protect confidentiality while still reaching the full market?
A broker who is genuinely working in your interest will have clear answers to all these questions and will be running a process designed to create competition, not avoid it.
The Bottom Line
Off-market sales are not a shortcut to a better result. For buyers, they can represent a missed opportunity. For vendors, they represent a sale that may fall well short of what the market would have paid.
The demand is there, the buyers are ready, and in the meantime the best thing any pharmacy owner can do is keep doing what they do best – building a great business and looking after their customers. The only question is whether, when you are ready to sell, your sale process is designed to capture that demand fully or to limit it.
If you would like to understand, obligation free, what a properly managed, competitive campaign looks like for your pharmacy, get in touch, my colleagues and I would be happy to walk you through it.
Written by Mark Wishart, Sales Executive VIC – AP Group
AP Group are the leading pharmacy experts in Australia and specialise in helping first time buyers find the right pharmacy and secure the finance to support their purchase.
We connect existing owners with over 5000 ready and eager investors via our cutting-edge online Data Room. Our Data Room keeps confidential listing data secure and allows buyers to make informed decisions on each of our pharmacies for sale.
AP Group have built connections with all the major banks and a host of smaller lenders, ensuring that first time pharmacy buyers find a better deal.
About the Author:
Mark brings a wealth of real-world business experience and a healthy sense of humour to the AP Group team. After more than 15 years self-employed in the retail and education sectors, he knows firsthand that running a small business isn’t for the faint-hearted. From finding the right people to managing cashflow and planning an exit strategy, he’s seen (and solved) just about every challenge that comes with the territory.
He’s also worked across FMCG and pharmaceuticals, sports retail, managing sales teams and channels with independent grocers, and spending 12 years with Aspen/Arrow, Trividia and Sigma Healthcare. The common thread through it all? A knack for building relationships and a calm, practical approach that gets things done.
Outside of work, Mark enjoys travelling, playing golf and soaking up the Bayside lifestyle with family. A long-standing member of the Australian PGA for over 30 years, he’s even coached our Managing Director, Rob Whelan – proof that patience really is one of his strengths. A loyal Richmond supporter, he’s still holding out hope for another premiership, ever the optimist on and off the course.