Dental market will ‘continue to bounce back strongly’ in 2021

Dental market will 'continue to bounce back strongly' in 2021Dental revenue recovered ‘much sooner than expected’ from the impact of the pandemic.

This is according to the dental market overview from Christie & Co.

It dubbed the dental market ‘remarkably resilient’ considering the ‘enormity’ of the pandemic at the beginning.

Early stages

However, it acknowledged some key challenges, namely the feeling that dentistry was ‘unfairly treated’ in comparison to other healthcare settings.

‘Most practices took advantage of the government support packages, although it became clear very early on that self-employed associates, particularly those operating in the private sector, would not qualify for the various financial support schemes available to others,’ it states.

It also reports that very few transactions were lost in regards to dental practice sales.

‘During this time, the market for dental practice sales effectively paused, as buyers and lenders took stock,’ it states.

‘However, surprisingly very few transactions were lost, with buyers generally taking a long-term view.

‘The number of completions across the market dramatically reduced and were limited mainly to NHS practices where providers continued to be paid at the full value of the contract.’

Resumption of care

Despite practices being able to reopen their doors from 8 June, the report suggests it took ‘several weeks’ before many private practices were back up and running.

New standard operating procedures (SOPs) and fallow time put the brakes on patient flow. However, footfall picked up after the summer.

‘As the year progressed and dentistry was reestablished, it became clear that the dire predictions made by some commentators about dental practice valuations falling were considerably wide of the mark,’ it reports.

‘Patients returned in droves, and this led to revenue recovering much sooner than had been expected.’

They also report that there has been a spike in interest regarding practice purchases from first-time and independent buyers.

‘Whilst demand for mixed practices remains, with buyers attracted to the security of income afforded by an NHS contract, the latter part of the year realigned to become more reflective of 2019 and 2020 Q1,’ it states.

‘This is as demand for practices with a higher proportion of private revenue increased. This was fuelled by the noticeable recovery of private income, driven partly by a backlog of patient demand and long NHS waiting lists.’

Predictions

Looking ahead, Christie & Co predicts the market will ‘continue to bounce back strongly’.

Predictions include:

  • The completion of a significant volume of practice sales in Q1 in anticipation of the Spring Budget and a likely increase in Capital Gains Tax (CGT)
  • COVID levels placed a heightened emphasis on oral health. It expects this reinvigorated appetite to continue from independent buyers
  • Ambitious corporate buyers will make up for lost time, and deal flow will increase considerably
  • Corporate buyers will continue to bid aggressively for larger practices. There will be renewed price inflation for better quality sites
  • A greater supply of practices from owners who put their exit plans on hold in 2020
  • The market to continue bouncing back strongly. However, price corrections will impact poorer quality businesses proportionately harder, as they struggle to adapt financially
  • Practices on the dental market that are in a ‘recovery stage’ will progress with more flexible deal structures. This will help to bridge the value gap, with increased deferred consideration and longer vendor tie ins.

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