After months of being unable to trade as a result of the nation-wide lockdown, you would expect to see corporate operators disposing of non-performing assets in order to account for lost income and higher costs. Interestingly, we have not seen such a trend in the dental industry. Quite the opposite, in fact.
Following a brief period of practice sales being put on hold, dental groups across the country gradually resumed purchasing sites – now seeking to make up for lost time.
While the dental sector has been significantly affected by Covid-19, and both Principals and Associates face new challenges and a shifting landscape of regulation, the nature of employment has protected many businesses from some of the staff challenges that affect other sectors. The revenue consistency provided by Plan and NHS income has also helped many practices from the worst impacts of being unable to trade.
Following practices reopening in June, despite the significant restriction of fallow time, dental practices were not hampered by a reluctance from patients to return, instead most continue to struggle keeping up with demand. Patients who would usually utilise an NHS dentist are increasingly going private to be seen quicker, and some practices have passed on PPE costs to patients.
Within months of reopening, several corporate operators were reporting a strong return of revenue, at least proportional to the number of patients they could see given fallow time restrictions. As opposed to discussing plans to pare down, group operators have emerged from lockdown with extra vigour to make up for lost time and restart ambitious acquisition plans.
We have also recently noticed an increasing trend in the number of Associates
looking to secure their income by acquiring their own dental practice. In fact, in the last year, approximately 80% of Christie & Co practice sales were acquired by independent operators.
This buyer appetite from both corporates and independent Associates has created increased competition in the dental market, bringing it to a level higher than we’ve seen in a long time.
The total value of offers received by Christie & Co from July to August exceeded that received from January to March (pre-Covid) by £50 million.
One example of the reinvigorated appetite from corporate operators is two mixed practices in Merseyside that have been separately agreed to a national group. The multiples achieved are in line with pre-Covid pricing and 100% of the proceeds will be paid on completion with no onerous tie-in terms.
On the independent side, we recently agreed a deal for a two-chair mixed practice in Birmingham to a bank-funded first-time buyer – proving that the demand from the independent market is equally as strong. We fully expect this trend to continue with prices remaining in line with national demand.
by Oliver Brown, Associate Director, Christie & Co