Dentistry is a vibrant and interesting business sector. The shape and activity of the market is fascinating as only 10 per cent of practices are in corporate ownership, this is much less than in other healthcare sectors such as pharmacy and social care. Having said that, the figure is growing as the corporates accelerate their acquisition plans and become more competitive.
The private practice sales market in particular is one that is constantly and rapidly changing. Traditionally private practices have been seen as less valuable to purchasers than mixed or NHS practices, but we have recently experienced an increase in interest
given the right circumstance and location.
Speaking to practice purchasers on a regular basis I tend to hear the same things, whether from the most inexperienced first time purchaser or a more seasoned corporate or group operator. Until recently this would be, "I'm looking for a mixed practice with an NHS contract of at least £300k, a good UDA rate and potential to grow private income.”
However, within the last few months, as NHS and mixed practice values continued to be driven higher due to what is often perceived by many to be ‘guaranteed income’, I have noticed a steady increase in enquiries for quality private dental practices. In spite of the average goodwill value of these practices being significantly lower than for mixed or NHS, they are beginning to be regarded as better value for money.
Of course, any practice acquisition is as much focused on managing the risks involved as it is the costs. Indeed, the danger of patients turning to a competitor practice during such a transition can have a major impact on the profitability of a practice. However, as the cost of entry into buying an NHS or mixed practice increases to record levels the lower cost of buying a private practice, and the (generally) higher profit margins, is encouraging buyers to re-assess the risk versus reward of investing in this area of the market. What’s more, the lower levels of bureaucracy and enhanced freedom to run your practice as you see fit has also served to increase the attractiveness of private practices.
Whilst dentistry will always be a primarily ‘needs’ driven service, a significant portion of private dentistry can be considered ‘discretionary’, especially when it comes to the more cosmetic and aesthetically focused treatments. As such, the performance of these practices can ebb and flow with the economy; in the up cycle, such as we are currently in, more money is likely to be spent by the patient, this enriches the profitability of private dental practices and improves their attraction to buyers.
With significant reforms to NHS dentistry coming into place in the very near future many corporate and multiple operators are beginning to see private dentistry as a way of balancing the risk within their portfolios; this is also adding to the noticeable improvement in demand for private practices in the last six months.
Therefore, with the changes to the NHS contract and the improving economy in general the demand for private dental practices has been steadily improving, a trend which looks likely to continue. So much so that it now seems the balance may finally be
shifting in the UK dental practice sales market.