April 9, 2025 | Pharmacy
How will CPCF Arrangements impact Pharmacy Sales ?
The recently introduced changes to the Community Pharmacy Contractual Framework (CPCF) have stirred significant discussion within the sector. One key concern is how these adjustments will impact those looking to sell their pharmacy businesses.
With the new arrangements potentially creating a net-zero cost impact, the financial appeal of acquiring a pharmacy may be compromised, making it harder for sellers to achieve favourable sales outcomes.
In this blog, we explore the effects of CPCF arrangements on pharmacy sales and why sellers need to be particularly cautious in the current climate.
Understanding the CPCF Changes
The CPCF, initially introduced in 2019 and subject to periodic revisions, sets out the funding and service expectations for community pharmacies in England.
The recent announcement, whilst reflecting upward momentum, feels a little underwhelming considering the changes coming into effect as of the new tax year.
Nations insurance contributions, wages, taxes and prices all set to increase in 2025 and again after April 2026, means that the new funding package will only mitigate climbing costs and is unlikely to have the desired effect on margins.
It’s starting to feel like the labour government is one which gives with one hand and takes with the other!
Reduced Financial Appeal for Buyers
One of the primary effects of CPCF arrangements on pharmacy sales is the reduction in financial incentives for potential buyers. Under the new framework, pharmacies may not see any net financial gains despite potential increases in service delivery requirements. For buyers, this translates to higher operating costs without a corresponding increase in revenue, potentially making acquisitions less attractive.
For prospective buyers who may have previously considered purchasing a pharmacy as an investment with potential future uplift, the new CPCF arrangements could serve as a deterrent. If a business cannot demonstrate clear profit growth potential, it becomes a less appealing purchase, reducing demand in the market and ultimately leading to lower sale prices for sellers.
Challenges in Valuation
Pharmacy valuations have gravitated more and more towards an EBITDA centred model which means for most pharmacy owners, that their margins are directly linked to the value they can extract on retirement/exit.
Pharmacies that rely heavily on NHS prescriptions may find their valuations affected as government reimbursements remain constrained. This shift leads to sellers having to justify their asking prices more rigorously, which could prolong the sales process or lead to downward negotiations.
On the other hand, it may transpire that the contract is more effective in practice than it appears it might be on first glance. Time will tell whether the increased funding will outweigh the rising costs. If gross profit margins increase over the course of the next 12 months, EBITDA based valuations are likely to trend upward.
Working with an experienced sector special firm like Prospect Estates will ensure you’re able to maximise the sensible valuation for your business. You can see how we can help further by reading our guide to selling.
What Can Sellers Do?
Given the shifting landscape, pharmacy owners looking to sell should take proactive steps to strengthen their business before entering the market. Some key considerations include:
- Optimising operational efficiency – Ensuring cost-effective operations can make a pharmacy more appealing to buyers.
- Engage in pro-active accounting – It would be advisable for pharmacy owners to monitor their margins closely over the next 12 months. Monthly management accounts would be a great place to start.
- Diversifying revenue streams – Expanding private services beyond NHS contracts can enhance profitability.
- Seeking professional valuation advice – Working with industry experts can help in presenting a well-justified valuation.
- Engaging early with potential buyers – Understanding buyer concerns can allow sellers to address issues before final negotiations.
Final Thoughts
The effect of CPCF arrangements on pharmacy sales is evident, with increased financial pressure and reduced buyer incentives creating a more challenging sales environment.
For pharmacy owners planning to sell, understanding these implications and taking strategic action is crucial in securing a successful sale. In a market that is becoming increasingly difficult to navigate, preparation and expert guidance are more essential than ever.
Prospect Estates are well placed to help you navigate a successful sale for your pharmacy business. If you would like to chat to an expert please call us on 01423 642190, email us at [email protected] or contact us via our website contact form.
View all our practices for sale HERE
April 9, 2025 | Pharmacy
