Sinking teeth into the dental practice market
Following 15 years of formally valuing dentistry practices for banks, Christie & Co recognised the need for a national company to enter the market to offer a range of business and property services to the sector and began providing sales, valuation and financial services to dentistry practices nationwide in 2013.
From selling one practice in our first year to practices with an aggregate value of £30m in 2015, we have had experience with many types of businesses ranging from single site to the largest corporate operator, with deals ranging from £120,000 to £7m.
As a company with a presence in all areas of the UK, we are able to share knowledge and contacts across the country, and have dental specialists living in each region who completely understand local market conditions and can provide a unique insight into the factors that will affect a business as well as being able to give an overview of national trading conditions.
Our insight tells us that now is a prime time to be trading in the dental sector. Ten years after the introduction of the new dental contract in 2006, which sparked a surge in transactional activity, there is still no sign of it slowing down.
At least this is what Christie & Co’s Business Outlook 2016 – our state-of-the-industry report into individual market sectors – suggests.
On average, we had 12 viewings on every practice offered to the market in 2015 and 80% of the practices we sold went for above the asking price. On top of this, we were also instructed to value a total of 241 practices for loan security purposes. This shows the fervent appetite amongst buyers; current demand is greatly exceeding supply and many potential purchasers have turned to higher risk but better return on investment opportunities in the private dental sector.
However, the market won’t be without its challenges in the foreseeable future. The proposed NHS reforms in England and Wales (services in Scotland will remain on a ‘capitation’ model), may bring some uncertainty into the market as we get closer to their introduction – now expected in 2018. This will cause the way in which NHS dentistry is delivered to change.
Whilst it is unlikely that funding will be significantly affected, this could increase the cost of running a dental practice so practice owners will need to adapt to a new way of working – something that many will already be used to. Despite this, private practices are becoming more attractive as more buyers are priced out of the market. NHS and mixed practices in particular will continue to be in huge demand due to the protected income and monopoly trading position.
Still, the outlook is positive: only 10% or so of the sector is corporate owned so regardless of NHS reforms, we expect to see further opportunities for consolidation in 2016. Banks are keen to lend and there is also a wall of cash coming into the sector from family money. Larger operators will continue to develop the ‘hub and spoke’ model and add more specialist treatments to their offering, such as cosmetic dentistry. We look forward to another prolific and profitable year for all in the dental market.
To find out more about Christie & Co, visit www.christie.com/en/dental_practices_for_sale.