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Dental Times - Practice Sales Intelligence
01332 609318
14 December 2017


PRACTICE ONE
Description & Location -
the historic acquisition of a neighbouring practice less than a quarter of a mile away provides a logistically easy to manage dual-site business in this bustling commuter town. Long established and with a loyal NHS patient base spanning many generations, both sites are well located on the outskirts of the main shopping area, with a primary road and main bus route running directly between.

The larger four-surgery premises has a car park on site, with space for up to 15 vehicles, and the smaller twosurgery premises has ample free on-street parking in the immediate vicinity. Following investment, external and internal branding is now cohesive across the sites, befitting the ongoing promotion of private and cosmetic treatments, which have only really become a focus in the last 12 months to facilitate the future growth of the business.

The freeholds of both sites are owned in equal shares by two of the three current expense sharing partners and are available on 15-year full repairing commercial leases at a combined rent of £41,000 per annum. Both properties offer future development potential with unused rooms in both, thereby providing an opportunity to generate incremental income from the rental of space to complimentary therapists and the development of a high quality holistic treatment centre.

Financials – with turnover averaging £1,094 ,000 over the last three years’ evidenced accounts, almost 85% of the income is currently derived from the NHS contracts held at both sites, inclusive of VT training income. With a combined target approaching 29,000 UDAs, contribution towards business profitability is just above average at £28.31 per UDA and the operational costs of performing this work are well managed with associate remuneration rates of £10.

With a flexible team of support staff covering full- and part-time roles, excess staff cover is minimised by mirroring nursing hours to clinical hours worked and wages are therefore in line with expectations at £166,000. Operational costs are slightly higher than usual for a business of this size due to the dual-site situation; however economies on service contracts have been made with discounts negotiated accordingly, therefore resulting net profit is good.

Agent’s comments – with three partners to individually plan for as part of this exit strategy, it was key to negotiate a deal that secured individual terms for each and at the same time fulfilled their quite different personal objectives for selling the business. Aged between 44 and 58, their ongoing work and income requirements post-sale were varied and a solution was identified to meet all of the partners’ needs.

After the anticipated immense interest from the corporate market, we secured agreement for the older partner to leave the practice immediately upon completion, with the remaining two partners engaging in associate contracts with tie in periods of one and three years respectively. Of the price achieved, £90,000 was deferred and released in equal instalments over a three-year period for renewal of the VT training contract and the continued commitment of the third partner as trainer.

Price achieved – £1,790,000 inclusive of goodwill, equipment, fixtures and fittings.
PRACTICE TWO
Description and location –
conveniently located just off the central traffic island in the town centre, with a retail park and bus station directly opposite, this four-surgery NHS practice benefits from a highly visible trading location. The business premises have been converted from residential use and, after significant extension and remodelling, now house a modern, well-equipped and spacious practice.

With recently extended opening hours and occasional Saturday morning clinics, chair time is being maximised and the principal has recently introduced the services of a part-time hygienist together with a specialist orthodontist on a monthly sessional basis to focus on increasing the historically low private income streams.

Financials – with £835,000 of the current £894,000 annual income being derived from NHS income, cash flow is stable and the large NHS patient base of 10,000 provides a good opportunity to further grow private income from offering enhanced treatment options and popular cosmetic procedures. The latest accounts include a cost for associate fees of £241,550 for the year; however this is significantly reduced by over £95,000 per annum with the incoming buyers’ business model, thereby increasing net profit significantly. Laboratory and material costs are well controlled at 9.6% of turnover due to close review of purchases and effective stock control. Contracted staff costs are confirmed at £114,198 inclusive of employers’ national insurance contributions.

Agent’s comments – with the vendor’s objectives for selling being to reduce increasing management responsibilities and to expand his studies into specialist fields, he is willing to retain a presence at the practice if desired on a part-time basis, or alternatively to leave directly upon sale. As he currently generates minimal private gross personally, it is considered that his leaving would not pose a significant risk to the protection of the goodwill for the new owners. The further option to lease or purchase the freehold was universally welcomed by potential buyers and enabled specialist independent financial advisors Medifinancial to act on their behalf to approach numerous healthcare lenders to obtain the best possible structure of package for each of their clients’ individual financial circumstances, and access rates not available on the high street.

With such an active market for highly desirable NHS acquisitions in this area, an open day viewing methodology generated a competitive environment for us to escalate multiple negotiations quickly and efficiently. Numerous offers were secured within only three days of viewings, with best and final offers being submitted on a ‘sealed bids’ basis, enabling the vendor to assess the most suitable overall deal for his requirements both in terms of sale proceeds and work requirements post-sale. The successful purchasers were an independent husband and wife team whose business model maximised the profitability performance of the business, enabling them to comfortably afford repayments on their investment whilst managing to implement a work-life balance that suited the needs of their family.

Price achieved – £2,019,000 inclusive of goodwill, equipment, fixtures and fittings and freehold.
Posted by: Anne Barker on 14 Mar 2016