Market Trending Upwards
The latest set of quarterly data on goodwill from NASDAL (National Association of Specialist Dental Accountants and Lawyers) makes interesting reading. Andy Acton of Frank Taylor & Associates comments, “The data is always interesting and gives a really useful and timely indication of how the market is behaving. Goodwill is important in the sale of practice, that’s very evident in the numbers when we are looking at reconstituted net profit multiples up to 9.5 times.
However, Andy also cautions “the devil is often in the detail, though and these figures are national averages across all practices, so regional distortions and the make-up of the patients (NHS vs Private) isn’t always apparent either. Of course, there may also be a lag between a valuation and a completed deal. Overall, the stats are a good indication of the direction of travel in the market, but we can’t treat it as a yardstick for every practice.
“Nevertheless, the upward trend on goodwill in completed deals continues and this is the first time, post pandemic, that two consecutive quarters have shown upward trends”, continues Andy. “At 152% of fee income, we are approaching the levels we saw immediately pre-pandemic which is very encouraging. The increase is driven by the mixed practice sector (145% to 179%), private practices were relatively flat (at c133%) with NHS goodwill figures falling (161% to 138%).
“The NHS sector is particularly interesting”, says Andy, “of course the guaranteed income stream is very attractive to many buyers, but the certainty around the future value will put a few off. NASDAL data suggests the practice sales market is holding up well and sales asking prices being achieved. This may also contribute to the relative attractiveness of the mixed practices, which offer the best of both worlds and the ability to flex between guaranteed income NHS work and private treatments.
“It’s too early just on one quarter to draw too many conclusions, and of course the full impact of the pandemic probably has still to play out in the figures, that’s why we await the next set of data, for the period 1st November 2021 – 31st January 2022 with interest.
“NHS or private, pandemic or not” says Andy, “selling a practice will likely be one of, if not the, biggest financial decision you will make in your career, and that’s why expert advice is crucial. At Frank Taylor we have many years of experience in helping sellers of practices maximise their sale price. For advice on how we can help, please contact us on 0330 088 11 56”.