Lis Hughes, Managing Director of Frank Taylor & Associates, looks back at 2014 and reflects on trends in the market.
We’ve seen a consistent sellers’ market all the way through 2014 and can see no reason why that’s going to change in 2015, however we don’t have a crystal ball!
At the beginning of 2014 there was some uncertainty about the timescale of changes to the NHS contracts as the pilot scheme was still underway, and the reality is next year proto pilots will be running so we would expect this to take at least another year and the expectation is the new contract (whatever it is) will not be introduced until 2017, potential 2018.
In the past 12 months we’ve seen anxiety turn to curiosity, but even when the market was anxious, Frank Taylor & Associates never ran out of associates wanting to buy a dental practice, and NHS practices never went out of favour.
We believe part of the reason is market demand, we have over 4000 dentists registered looking for a dental practice and, as the average income of an associate has taken a downward turn coupled with the oversupply of associates has made associates dentists keener to get their hands on a practice. Bank loans are easier to get – currently there are 14 high street banks lending to dentists and the bank of mum and dad is alive and well.
Following the finanicial crash in 2008 there was a definite dip in the value of private practices in particular, however, since then there has been a steady increase in both private and mixed practices. However, location is still a key driver to goodwill valuations. We are seeing a number of associates who are keen to develop a private element to a practice and cosmetic dentistry is continuing to thrive.
Corporates do have a war chest and many are approaching principals directly – whilst this is flattering we would urge any principal to seek professional advice and contact us to obtain an accurate evaluation of the practice. We have been introduced to a number of transactions when the price which has been agreed is much lower than market value. And, most principals we deal with would much prefer to sell to an individual rather than a corporate.
There’s also a new breed of entrepreneurial dentists whose objective is to acquire more than one practice, and it is not unusual to see two or three associates club together to purchase a practice.
A definite trend in 2014 has been principals considering their succession planning at an earlier age. Historically we would have these conversations with principals in their sixties however, more and more are in their early fifties and want to realise their asset whilst the market is so competitive. For example, I spoke to recently principal who is 52 and wants to sell at 55 and wants to spend the next three years improving his practice and create strategies to deliver a maximum sale price a few years down the line. Frequently, a principal will want to continue clinical work without the headache of running a business, not all though as we recently sold a practice and the principal has gone sailing round the world!