During the last few years it has been factually proven that London and the South East has achieved significantly higher values and multipliers of profit than any other part of the country. However, when these areas are excluded from our analysis, the North - South divide is less evident with values across the country seeming relatively similar, save for marginal wage variations and specialisms.
In the last six months, Christie & Co has looked at over 45 practices (for banking purposes) with an approximate value in excess of £25m within the northern region of the country where values achieved have been extremely strong for all types of practices.
Banks see dentistry as a ‘green light sector’ and are lending heavily in it. Relative to other sectors, such as social care, the dental sector has been very resilient during recessionary periods. Funding is readily available from many of the traditional High Street lenders and there have been a number of new entrants to the sector including specialist lenders.
The proposed NHS contract reforms in England and Wales were originally due to be introduced in 2016 but it is now more likely that they will be phased in during 2018 at the earliest. Retiring practice owners are using this mechanism to consider a possible exit/sale, however this element of uncertainty has by no means filtered through to buyers or values and NHS practices remain high on their list of priorities.
The market and price being achieved for dental practices is considered to be at a record high, which is being fuelled by all of the above factors. First time buyers are often backed by a wealth of cash so are able to compete with all buyer types resulting in competitive bidding over and above marketing prices. In the majority of cases a marketing price is often used as a guide only as in most cases a marketing price is exceeded due to the competitive tension that an open marketing campaign causes.
We often see achieved values being within the market guidelines/average, both as a multiplier of Net Annual Adjusted Profit (EBITDA) and as a percentage in the pound, although within certain circumstances multipliers and percentages are at significantly higher levels depending on the demand of the practice in question.
The market across the country is considered to be extremely strong for all practices with a particular emphasis on NHS driven income although private practices are seeing more demand and as a result higher values are beginning to be achieved on a more regular basis.
Again it is common where a private practice has high insurance backed income (which creates less risk for a new purchaser) for values to exceed the industry norm.
Given the current demand for practices, availability of finance and limited supply of all types of dental surgeries (NHS and Private) we do not see a slowdown in the achieved value in a dental practice – in either the north or the south of the UK.