Click Fraud Protection Tracking Pixel
Google Reviews
Google Reviews
0330 088 11 56     A A A

It’s great to see the latest NASDAL Goodwill Survey released, but …

Posted on April 09, 2019 in Articles & Frank Taylor & Associates

As an opener it is worth noting that the valuation of dental practices has evolved to a point where goodwill values are routinely quoted as a multiple of profit and not a percentage of fee income as is the case in the NASDAL survey. At Frank Taylor & Associates (FTA) we still use both measurements as focussing on just one can lead to a flawed valuation. However, most specialist dental valuers, the banks and bank panel valuers all focus on the profit multiple today.

The average NHS goodwill value of 118% is very low compared to the experience of FTA – for the last quarter NHS deals transacted through FTA was 178% (for the sake of consistency quoting values as a percentage of fee income). My hunch here is that the NASDAL survey would include several deals which did not involve a broker (private sales) and these routinely result in the seller getting below the true value.

There is a similar pattern for private practices (FTA quarterly figure 139%) and mixed practices (FTA quarterly figure 149%). Interestingly there is another difference from the NASDAL figures with buyers and lending banks tending to favour practices with an element of regular income (e.g. NHS or plan based income).

On the disparity point – there must be a wider story behind these numbers, as based on my experience, there is something that doesn’t make sense here.

The ‘Corporate Dumping’ piece could well be the start of something bigger. The corporates (of all sizes with the support of private equity) have been growing over the past few years to hit their growth targets. This has led to some acquisitions in areas that have been hard to staff, don’t fit the corporate model or are just uneconomical. There is now a plethora of corporates in the market who could well see their tied in vendors leaving over a 9-12 month period creating a ‘fee income gap’. Depending on the timeline being worked on by the investors this could well impact on the expected exit multiple. Over the years I have worked with several corporates to help re-balance their portfolio and sell the practices that don’t fit a corporate model or don’t sufficiently add to the bottom line.

Any practice owner planning to sell should seek an independent valuation to ensure they are receiving a fair price for their prized asset.

Get in touch

Please provide your details below and a member of our team will be in touch with you shortly.

Claim your FREE guide 10 Top Tips for Selling a Dental Practice
Frank Taylor & Associates

© Frank Taylor & Associates, 1 Bradmore Building, Bradmore Green, Brookmans Park, Hertfordshire AL9 7QR. All rights reserved.

Dental Website Design by Digimax Dental

Do you want to:
No thanks, please take me back to the main site.