Spike in associates looking to purchase dental practices

dental practice for sale associatesMany more dental associates are looking to purchase practices following lockdown, figures from Christie & Co show.

In its first ‘Buyer Registration Index’, Christie’s figures show a 59% increase in buyer registrations since the UK eased lockdown measures.

The property adviser believes this increased appetite is due to associates looking to secure their future income after recent pay cuts. The COVID pandemic has also given associates time for reflection and an opportunity to shop around the market.

‘Whilst it is well documented that some investor-backed corporates have recently paused their acquisition trail, appetite from the independent market remains very high,’ Jonathan Watson, director of medical at Christie & Co, says.

‘A great example of this is a two-chair mixed practice in Cheshire that we brought to market in July. This received nine viewing requests in the first two days of marketing.

‘We’re also seeing that a fall in private associate pay is accelerating buyers’ plans to purchase a practice.

In the last year, approximately 80% of Christie & Co practice sales were acquired by independent operators. We expect this trend to continue throughout 2020 and beyond.’

Practice values on the rise

Recent NASDAL figures show the value of dental practices continues to rise for the sixth quarter in a row.

Goodwill rose to 159% of gross fees in the last quarter up to January, compared to 157% in the previous quarter. This continues a sustained increase every quarter from a low of 122% of gross fees in the quarter ending October 2018.

The increase predominantly comes from a jump in private practice values. NHS practice values dropped in the latest quarter from 166% of gross fees to 155%.

‘It’s fair to say that the most interesting part of this survey is effectively what it doesn’t show,’ Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, says.

‘That is what has happened since March 2020 and the advent of the coronavirus pandemic. Following this, I think it is fair to say the days of the spectacular corporate deals are over.’

However, the coronavirus pandemic could see the end to the rise after latest projections show dentistry will feel the full financial impact of COVID-19 in late 2021, with private practices around £71,000 worse off.

Financial forecasts show a typical private practice could see losses of £71,269 following COVID-19. This is mainly due to loan repayments and PPE costs.

Author’s analysis

It’s only natural to see what’s available while many associates have been unable to go to practice. And after the lockdown, some associates will want to take control of their own future.

In normal times an increase in interest might result in a jump in prices and deals done. But after the pandemic, there’s every possibility we could see the opposite.

However, many financial companies report confidence from the banks to lend to the healthcare sector.

The latest NASDAL quarterly figures are just round the corner. Only then will we see the true impact of COVID-19 on dental practice values.

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