Brand values of global retail pharmacies

BVWire Issue 157-2_image002Healthcare is a growing sector and is generating a lot of interest in the valuation profession because of the number of M&A deals and high levels of profitability and valuation multiples. This month’s brand value snapshot from Markables presents trademark comparable data for retail pharmacies. In a benchmarking study, the brand valuations of 14 retail pharmacy brands between 2002 and 2014 in six different countries were analyzed. Firms in this industry typically operate a chain of pharmacy stores. Canadian Shoppers Drug Mart is the largest business in the sample of data. The sample does not include online pharmacies, specialty pharmacies, or chemist’s stores.

Healthy metrics: The interquartile range analysis shows a median trademark royalty rate on revenues of nearly 1.4%, and a median trademark value of 9% of enterprise value, for mean sales multiples of 0.7x revenues and higher (see the table below). Six of the 14 cases have finite useful lives with an average of 11 years. Grocery store chains compare closely to retail pharmacies in certain aspects, such as location, proximity, range of products, and, sometimes, even shared premises. But it is no surprise that retail pharmacy brands show higher brand value multiples than grocery stores—although not by much (0.8% royalty rate, 7% of enterprise value).