Average dental practice prices jumped 5.4% in 2019
Larger practices operating in the private sector grew at a faster rate in 2019 than their NHS counterparts.
With the effect of Covid-19 hitting the independent practices hard, we have seen acquisitiveness wain and a retraction of pricing in the short term.
The dental sector was growing at a strong rate prior to Covid-19 and with many acquiring groups firms having paid preliminary deposits to acquire, we now understand that some have reviewed their acquisitions for the foreseeable and in some cases are trying to enforce a refund of preliminary deposits paid to agents.
Dental practice prices continued growth
Average growth in dental practice prices is continuing at a similar rate last year, following on from a similar trend in 2018 which saw a 5.2% price rise.
It had been expected that dentistry would see continued growth in 2020 as dental companies looked to expand and improve their portfolios. The addition of private equity investment in 2019 will further increase the demand for larger practices and meant that the dental sector was seen as a safe market to invest in.
We believe that the acquisition market will slow down due to sellers wanting to rebuild value in their practices to achieve better yields. Previously active groups of acquirers are also reviewing their acquisition plans. Whilst bleak it could be 18-24 months before we start to see a resurgence of transactions again.
Two thirds of dental practices are independently owned, with small groups and dental corporates sharing the other third.
Looking to the future we feel that as private equity funds start to flow again, and lenders appetites pick up there will be:
- Continued demand for urban practices as corporate groups target larger practices, particularly those with an EBITDA of £250,000+
- There will likely be an increase in the volume of NHS practices looking to exit. We expect sellers to maximise their returns ahead of the potential contract reforms.
- Pre CV-19 UK dental practice prices increases will encourage mature dental groups to return to the table. UK practices still represent good value and consistent growth outside of recession times.
- We expect Insurance Policies to be redrafted moving forward. Clearly firms need better protection from Pandemic type situations in the future. A robust level of cover provides acquiring parties a higher level of resilience against any such future events.