A dynamic market
The pressures of the cost-of-living and recruitment crises have been hard on practice owners and also on larger groups. BUPA, for instance, announced earlier this year that they would be shutting 85 practices, selling (at a discount), closing or merging them; other groups are also selling off their practices. Interestingly, this has had a positive impact on the independent market, with activity increasing by 7.2%. Due to the rising costs of financing, many first-time buyers are feeling the pinch as debt servicing is tighter – rates are around 6.5% to 7.5% once the bank’s business margin is built in, a leap from the 1.75-2.5% they sat at only 18 months ago. However, approximately 67% of practice sales are attributed to first- or second-time buyers. Figures show that this is largely due to the sales of businesses that are less appealing to groups, but are more attractive to owner occupiers. This is testament to the practices which are selling reasonably quickly which are those with values less than £800,000 where a buyer requires less lending. Likewise, the upper end of the market (£2m+) is moving as pricing has been adjusted to encourage competition once again. Practices in the middle, where some would argue market expectations have been slower to adjust, are the practices that currently slower to move. Also, it’s worth mentioning that the recruitment crisis has had a negative impact on market demand for larger NHS practices in rural areas, where it’s much harder to recruit dentists.
A note to potential sellers
Big groups and corporate buyers are becoming more selective when deciding on acquisitions, though they remain active in the market. The independent market is currently very strong, even with the recent hikes in interest rates.
For practice owners looking to sell now or in the future, it’s important to be prepared and ensure that your business is as attractive as possible to potential buyers. There are many ways this can be done, for example, prioritising business growth over a certain period of time (usually, the longer the better) to ensure you’re in the strongest position possible. Focus on marketing and promoting the services that you offer, to attract more custom. Think about the ways that the experience can be improved for existing customers, and boost patient loyalty. There are many low-cost marketing methods for these endeavours, such as a referral system to encourage patients to recommend family and friends, or utilising social media to shout about the services you offer and create a strong online presence.
Plus, practice owners must invest in their existing team members – a strong, satisfied team can be a boon for the practice. Invest in your people, and work with them to devise ways to improve their experience in the workplace. Nowadays, the focus is largely on skill development and career progression – what can you do to facilitate this? Plus, ensuring that the workplace is a positive, proactive environment will appeal to prospective candidates and keep current employees happy. Recruitment can have a huge impact on the type of deal you secure when selling your practice, so it really is worth looking at areas that need improvement. High staff retention will appeal to buyers – it’s a unique selling point in and of itself, so ensuring your team is strong and stable is vital prior to selling.
The strongest position
Evidently, the dental market has been feeling the impact of all the Black Swan Events over the last through years from Putin’s War to the quantitative easing in the pandemic – there has been much to reckon with. Based on our recent Goodwill Report, the market does appear to be softening with regards to the average multiple paid over the past three years, but not plummeting! The market continues to be strong, especially the independent sector. For those looking to acquire their first or even second practice, they are in a strong position to do so.
At the moment, it being a market where buyers have a little more firepower means practice owners looking to sell at some point in the future should start thinking about how to maximise the value of their practice. Dental Elite offers a free practice ‘health check’, which now includes help with your CQC registration. The team have decades worth of experience helping professionals buy and sell their practices, in addition to sourcing ideal candidates to join the team.
Dentistry has always been resilient and has the benefit of being cyclical in nature. It’s not easy to predict what the next six months will hold, but at the moment there are plenty of positives to take away.