To Sell or to Merge Dental Practices?

If you are considering the acquisition of a second practice, it’s important to remember that this is not the only viable option available to you. This is great time in the dental industry to consider a merger, and what’s more, it might provide a cheaper solution to grow your business.

There are several different benefits to a practice merger as opposed to an outright purchase, and one of the most influential advantages is that it’s less expensive to effectively buy-in goodwill.

The example being that if you were to acquire a practice, it might be valued at up to seven times the EBITDA (earnings before interest, tax, depreciation and amortisation). However, if you were to merge with this practice instead, the EBITDA growth could potentially be bought at less than half that price, providing a much cheaper way of gaining the goodwill value.

What’s more, combining two practices under the same roof means they are far easier to manage as a single business. Amongst other benefits, this ensures staff are within close enough proximity to each other to complete collaborative cases with ease and the practice manager can oversee the business from one single location. All these aspects increase the likelihood of success for the merger, and consequently the long-term success of the business.

While an ideal option for independent practices wishing to grow, it is just as common for micro- or macro-corporates to merge practices to increase their efficiency. If a practice has spare surgery rooms that are not being fully utilised by the existing business, then merging the practice with another will fill the space and streamline expenses.

Principals looking to merge with a new practice should, however, pay close attention to ensure that the cultures of the two businesses align. For example, a practice that offers mostly general dentistry at mainstream prices would find it very difficult to merge with a dental provider that offers specialist services for which it charges more. If two disparate practices from different ends of the spectrum were to merge together, then there is likely to be some element of clash in the type of dentistry they’re delivering.

It is also important to ensure that the current principal is fully on board with the project. Ideally you would want to make sure that the principal moves with the goodwill, at least at first, as this will help to encourage the patient base to move across too and make the transition more seamless.

And of course, any NHS merger must be completed in line with the NHS England policy on the merging or relocation of NHS contracts. As these contracts are location-dependent, you will need to agree an intended merger or relocation with the Local Area Team (LAT) and NHS England before you can go ahead.

Whatever your current situation, at Dental Elite we understand the complexities you face and can provide you with the right advice to make the most suitable arrangement. Why not make the most of what a merger could offer you and your business? Our highly experienced team are on hand to help you explore all the possibilities and to ensure you get the very best deal. To find out what the best situation is for you, we have a no obligation free valuation.

For more information and to find out how Dental Elite can help to sell your practice visit dentalelite.co.uk, email info@dentalelite.co.uk or call 01788 545 900