Les Jones, Tom Coates and Jonathan Watson discuss changes to the landscape of dental practice sales in recent years.
The practice sales market has seen remarkable change over the last few years with extensive purchasing by corporates being followed by divestment of large numbers of practices. So, what does practice ownership look like now?
Practice Plan creative director Les Jones spoke to two people who play a part in the buying and selling of practices to find out their views. Tom Coates is a solicitor and director of Buxton Coates Solicitors, and Jonathan Watson is director at Christie & Co.
Les Jones (LJ): The practice sales market has been through a tough couple of years. How are you finding things at the moment, Jonathan? Are people still buying NHS practices?
Jonathan Watson (JW): The honest answer is that there seems to be a two-tiered market where we are seeing cautiousness from the corporates and larger buyers for big NHS contracts. Recruitment challenges seem to be the main driver behind that. There’s some erosion of profit there, as they’re having to pay more for associates to fully allocate those contracts. So, I think there has been a challenge realising pre-pandemic results with larger NHS practices.
However, at the lower end of the market, perhaps sub-million-pound practices, there’s still significant appetite for mixed practices from independents. Perhaps first-time buyers or husband-and-wife teams who can deliver the UDAs themselves and alleviate a lot of the recruitment issues. We’re still seeing well-located practices in Birmingham and Manchester in particular that are snapped up in a number of weeks. So, the NHS is far from dead. There’s still lots of appetite there.
LJ: It’s interesting to hear about things from your perspective about what’s happening out there. Are you seeing people handing back their NHS contracts, Tom?
Tom Coates (TC): I agree with Jonathan that we’ve not seen any lack of appetite for people buying. We are still dealing with just as many NHS practices being bought and sold as we are private. However, what we are seeing is people at a different stage in their career perhaps getting a little jaded with the NHS.
To answer your question, yes we are dealing with significantly more people who want to hand back NHS contracts and guiding them through that process. We also always say to people that handing back is not always their only option. There is also the possibility to sell an NHS contract. It must be local and there are certain criteria that must be met to be able to do it, but you should always explore selling an NHS contract as well.
LJ: Can you explain briefly how that works? In effect, you can hand back the NHS contract without selling the practice?
TC: Yes, absolutely. You would have to relocate it and you would need to look into the NHS regulations about relocation of an NHS contract. It must still serve the same patient base, so they’re only going to let it move within a relatively small radius of your practice. They will also look at things such as how patients would benefit.
We always approach it by asking if there is somebody in your town who would want to take on your NHS contract. Have you had a conversation with them? What you’re not going to be able to do is sell your NHS contract to somebody 10 miles away in a different town. It is only possible under a very specific set of circumstances. But it’s worth looking into.
LJ: Are we seeing more independent buyers coming into the market at the moment? What’s your experience, Jonathan?
JW: I think there’s been a perception that the corporates have bought a significant proportion of practice sales, and that is true. However, we’ve always sold roughly 60% to 70% of practices to independents, even during the aggressive acquisition programmes from the corporates. It’s shifted now and it’s probably more like 80% to 90% of practices we’re seeing are being sold to independents. We’ve seen a lot of corporate mergers and periods of integration from the corporates, but also lots of first-time buyers.
We’re seeing independent buyers stretch what they can afford and buy bigger practices. We’re seeing large million-pound practices sold to independents, even first-time buyers, quite regularly. The banks are also really keen to support them.
TC: We see things at the next stage after the brokers, but our makeup of sellers and purchases has nearly always been 75% or 80% first-time buyers. The extent to which the buoyancy in the market’s being driven by the corporate has been overstated over the years. That hasn’t been our experience. It’s usually young first-time buyers very often with a sum of money from the bank of mum and dad.
LJ: Picking up on your point Tom, have you seen a shift in the demographics of people buying practices now in terms of male, female or ages?
TC: First-time buyers have always been young for obvious reasons. People who are exiting the market are of an age where they’re fed up and they’re a bit weary of some of the hoops that they have to jump through in running a practice.
But the demographic hasn’t changed from what we’ve seen. It’s young aspirational people, more business savvy, and more willing to surround themselves with expert advice and investing in systems like HR. People with more business acumen is how I would describe the buyers we are seeing.
LJ: It’s fascinating to hear how, despite what we may see in the media, the behaviour of buyers and sellers hasn’t changed as much as we think over the past few years. Thank you both.
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