Practice sales ‘strong but chaotic’

The sales market of NHS dental practices in England has been thrown into chaos following the changes to the administration of primary dental care services, according to NASDAL lawyers who continue to finalise difficult deals against the odds.

NHS England and its 27 Local Area Teams (LATs) have taken over responsibility for primary care services in place of Primary Care Trusts and in some cases lengthened the time it takes to sell a dental practice by months.

Louise Fegan, of NASDAL law firm Morrisons Solicitors, explained that, in addition to the change in administration, further layers of bureaucracy had been added into the sales process.

Firstly, the Care Quality Commission (CQC) required the buyer and seller to enter into a period of joint ownership of the practice to last beyond the completion of the sale. This meant both the buyer and the seller had to be jointly registered with the CQC.

'Some LATs will not issue a contract variation until they have had sight of the application to the CQC in the name of the buyer and the seller. Meanwhile, other LATs do not look for any requirement, making the process inconsistent and chaotic.'

Russell Abrahams, of NASDAL law firm Abrahams Dresden, said it felt as if LATs were working hard to slow down the sale process, especially when a practice was incorporated and the permission of the commissioners was required to sell it. He said they were coming up with many different excuses, such as: 'We are waiting for a new NHS England GDS Contract before we can make progress.'

Both agree it remains a seller’s market, particularly in the south, with Santander and RBS doing the lion’s share of the funding, while Lloyds TSB is busiest in the North.

Russell reports that the new bank, Metro Bank, is coming on stream and appears to be taking a slice of the dental market.

Alan Suggett, a partner in UNW LLP and the specialist dental accountant who carries out the quarterly survey of dental practice goodwill values for NASDAL, confirmed that, in the quarter ending 30 April, the dental practice sales market was strong.

The average goodwill value expressed as a percentage of fee income of a dental practice was 104%, compared to 106% in the quarter ending January 2013. Meanwhile the corresponding goodwill percentage for valuations prepared by professional valuers has crept up from 96% to 99%.

The differential between private and NHS practice values is still marked, said Alan, with the goodwill sale value of an NHS practice at an average of 121%, and a private practice at an average of 91%. He stressed, however, that there were a number of transactions which varied significantly from the averages, so care should be taken when using the results of the survey.

In addition, continued Alan, it should always be borne in mind that, whilst the percentage of fee income valuation basis is interesting, in some cases a value based on a multiple of profits is more appropriate.

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