“everything is changing”
We feel the dental market is showing cracks and valuations may peak this year, leading to falling practice values.
We expect 2017 to mark the end for the bull cycle and expect prices to drop by 2018.
Latest figures show that actual deal completion prices dropped by 3% from the previous year, for the first time since 2006.
Why Panta Rei
Now more than ever, we feel we need to look back and learn from our ancestors. Heraclitus was one of the greatest philosophers of ancient Greece. His philosophy “Panta Rei”, literally meaning ‘everything flows’ or everything is constantly changing and evolving, although 2500 years old, is relevant to UK Dental Practice values. We strongly feel that valuations of Dental practices will peak this year, and drop by 2018.
A huge slowdown in Corporate Dental Acquisitions
Southern Dental and Mydentist, two of the most active acquirers in the last few years have now stopped buying practices. In fact, we believe they are trying to sell some of their practices.
Oasis, who are in the process of selling to BUPA, have also slowed down their acquisitions.
We believe, all this Dental Corporate inactivity will have a negative impact on dental practice valuations in the long term, and values will fall.
Brexit means exit, but for the dental market it also means difficulty in recruiting an EU dental work force which will subsequently affect practices in less desirable or hard to reach areas.
New NHS Contract
There appears to be two trends of thoughts in regards to the proposed NHS contract reforms.
One being that 2018 could be the year of change, the other that changes will take place but not until at least 2020.
Regardless of when this is going to take place, the view is that practice owners are likely to suffer with an increased cost of running their NHS practices. Higher costs ultimately means a lower valuation.
The NHS proposed contract reforms are on the horizon and could have a negative impact on deal completion prices.
Who will be affected?
The first to be affected could be owners of groups of 5-7 practices who are considering selling as they could lose some of their potential buyers that were willing to pay good prices for their group.
Some group owners are following the larger corporates strategy and are selling some of their practices and looking at “tidying up” their organisations structure or implementing a refinancing exercise.
Secondly, we feel this will have a knock-on effect on goodwill valuations across the UK, as some of the larger buyers diminish and concerns about the NHS contract arise.
Why now is a good time to sell
We are currently supporting a number of clients that are thinking ahead and selling their NHS or mixed NHS practices, capitalising on their hard work and setting up smaller private practices elsewhere.
There are over 50 small groups (10 to 35 sites) still willing to spend their yearly budget on practices that fit their selection criteria, with one of the most important criteria being location, with hard to reach areas struggling to recruit a workforce especially from abroad.
A small number of practices that are in a good strategic location, for example those right in the middle of a cluster of an existing group, should still sell for a relatively good value, but for the others we feel that prices could potentially drop in the next 12-18 months because of the lack of activity from larger and busier buyers and of the increasing difficulties in recruiting dentists and support staff from abroad.
When you add this to the proposed upcoming NHS dental contract reforms, it is evident that the game is changing and prices will fall, “Panta Rei”.
We feel being a step ahead can prevent a potentially stressful situation and one of the most important factors to ensure you get the best deal is the timing of your sale.
Now could be the best time for you to sell.
If you are considering a sale, please contact the friendly Samera Practice Sales team on 0207 100 8788 or email us on [email protected] to arrange your free, professional , confidential and non-committal valuation report.
How much is your practice worth?
If you are still not sure but want a good idea of how much your practice is worth, please complete contact us on: [email protected]
Further information on falling practice values
To find out more, check out our Learning Centre, full of articles and webinars covering how to buy, start, grow and sell medical businesses, or book a free consultation.