Dental Times - Growth in Dental Practice Values & Funding
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23 September 2018
Demand for Dental Practices in 2017

Values for NHS and private are still on the upward curve, with London and the Home Counties values predominantly higher than the rest of the country. We have seen a spike in 2016 for the price of predominantly NHS practices in urban areas, with demand totally outstripping supply.

BUPA acquiring Oasis and {My} Dentist no longer looking to acquire at this point will not dampen the values. In 2016, the independent and small group buyer market acquired 93% of all practices sold through MediEstates. Their offers were significantly higher than the corporates could go up to, as their hands were not tied by the levels of profit multiples that could be offered.

We expect in 2017 that values will not drop as more and more buyers from home and abroad are entering the market to get a piece of the stable British Dental Healthcare Sector.

Dental Practice Loan Funding in 2017

The Movement
Historically, the lenders have had very clear credit policies on how they were able to finance clients looking to purchase within the healthcare sector. This meant they were only able support a particular type of client and/or practice. This resulted in red tape and obstacles which needed to be overcome in order to facilitate a loan. However, more recently, the lenders have been given more freedom which will benefit the sector, allowing for greater financial support.

The Evolving Sector
As such, the banks no longer have a specific ‘one size fits all’ credit policy, following guidelines rather than rigid policies allow for lending representatives to exercise their initiative, providing them with much more movement. The lenders will therefore look at each case on its own merits; really trying to push loan-to-values to 100% unsecured lending in some cases. This allows lenders to evolve alongside the expanding healthcare sector. Such movements are incredibly exciting news, as it means that the market has really opened up, providing buyers with options that in the past would not have been possible.

How we can help
The scope on lending for a practice purchase has many considerations and variables. At MediFinancial we will contact the banks and building societies on your behalf, in order to secure the best possible deal that fits with your individual requirements. We have built valuable relationships with the lenders through the years and using our expert knowledge, we are able to present your case to them in the most attractive way which results in a more positive outcome. We will provide you with whole of market research, allowing us to source the very best deal available to you through our bespoke advice.
Practice One
Practice Location -
Established over 55 years, the current principal acquired the business in 1983 as a going concern. The practice is located in a large town in the North West of England, with a prominent high street position and excellent transport links.

Type of Practice - This is a 2 surgery NHS practice with all of the income generated by the current principal. There is plenty of expansion potential on the first floor with room to create a 3rd surgery if required. The freehold premises were owned by the vendor who was flexible with regards selling or retaining the freehold.

Financials - The practice income was completely derived from the NHS contract worth £180,000 for 7,200 UDAs. Net profit margin was lower than average and could easily be improved by an incoming buyer through careful cost control.

Buyer Appetite - The practice was advertised to our priority tier buyers, with 9 viewings taking place and multiple offers being received. The level of demand amongst buyers resulted in a higher sale price being achieved.

Reason for sale / Incoming Purchaser - The vendor was looking to retire and wanted to cease working at the practice relatively quickly after a sale completed. The incoming purchaser already owned a small group of practices in the area and was looking to expand their estate.

Price Achieved - £280,000 for the goodwill, equipment, fixtures and fittings, in addition to £85,000 for the freehold premises.
Practice Two
Practice Location -
Located within a large Scottish city, this practice was first established in 1954 and acquired by the current vendor in 1990. The premises comprise a converted residential terrace close to other shops and amenities in an area of high footfall.

Type of Practice - There are 2 fully-occupied surgeries within this NHS practice, with one associate and a part-time hygienist working alongside the current principal to deliver the income. The freehold premises were to be included within the sale.

Financials - Annual turnover of £271,409 is almost exclusively generated from NHS income. The practice employs 1 full-time dental nurse alongside 5 part-time dental nurses who also cover reception duties.

Buyer Appetite - We successfully marketed the practice to our general market buyers, sending out 269 Sales Particulars to buyers, with a timely sale being achieved.

Reason for sale / Incoming Purchaser - The outgoing principal was looking to retire immediately; this suited the incoming purchaser who was a first-time buyer looking to work within the practice full-time.

Price Achieved - £491,956 inclusive of goodwill, equipment, fixtures/fittings and freehold, which was in line with the original marketing price.
Practice Three
Practice Location -
This relatively new practice is located within a coastal town in North Wales, and was set up from squat by the current principal. The practice is surrounded by other healthcare facilities in a dedicated community area within the town centre.

Type of Practice - This 2 surgery practice is fully private, with a third of the income derived from capitation and two thirds fee-per-item work. The outgoing principal delivers the majority of income alongside a part-time associate and hygienist. The freehold premises, valued at approximately £175,000, were owned by the vendor who was open to selling if preferred by the incoming buyer.

Financials - Annual turnover is approximately £475,000 with a healthy net profit of £167,000. Both establishment costs and staff costs at the practice were monitored closely to ensure the profitability of the practice was maintained going forward.

Buyer Appetite - This practice was sold on our general market with over 590 buyers viewing details online.

Reason for sale / Incoming Purchaser - The principal was looking to reduce their responsibilities and was happy to stay on at the practice post-sale, subject to agreeable associate terms. The incoming buyer was purchasing as an investment opportunity and was keen for the outgoing principal to continue working at the practice, to maintain the continuity of income going forward.

Price Achieved - £560,000 inclusive of goodwill, equipment, fixtures/fittings and freehold.
Posted by: Dean Barker on 17 Feb 2017