What Dental Elite’s mid year goodwill results indicate

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  Posted by: The Probe      3rd January 2018

What Dental Elite’s mid year goodwill results indicate

Here, Luke Moore dissects Dental Elite’s latest mid year goodwill results.

Our latest mid year goodwill results from September based on all the practices Dental Elite has valued and/or sold in the last financial year, has revealed a number of changes, with significant activity still bubbling away across the board.

The average dental practice transaction value is up, increasing to £1,152,937 since the last goodwill survey. However, this figure is only reflective of the practices that Dental Elite has represented and not the wider market. The average sale value has also gone up 7.67%, supported by big leaps in the multiples obtained not only for practices in general, but also for private practices. We have been reporting a strong demand for private practices for over 18 months now, and if these figures are anything to go by the market is unlikely to slow down any time soon. Moreover, the value of mixed practices has overtaken NHS practices, demonstrating an increasing interest in growing private revenues.

The other notable change to have come out of the results is that the multiples paid of adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) and adjusted net profits have increased since the financial year-end 2017. In the main, the amounts are greater than the corresponding turnover indicator, which suggests that whilst dental practices are being hit by a softer pound and climbing costs, it is actually the buyers who are feeling the pinch, as they are paying a greater multiple than the owners themselves. This demonstrates that the market is generally becoming increasingly more competitive.

Saying that, there are still some areas throughout the UK where practices are a little less popular with prospective buyers. Compared to the previous goodwill results there has been a slight drop in goodwill values across the South West and in the North East and Yorkshire. This is accompanied by the fact that Dental Elite hasn’t sold any private practices across the North East for the first time ever. While this could be a sign of weakened demand, it is no coincidence that fewer buyers are looking for practices in areas where recruitment is tougher.

The market for private practices in these locations is also a lot tougher unless the turnovers are of a size where they become more attractive to consolidators looking to add to their private practice empires. In the Central Belt and North West on the other hand where recruitment is much easier, we have seen big increases in value as the micro-consolidators expand their patches.

In the Midlands, it must be noted that the results did show an anomaly. This is worth bearing in mind, because while the percentage of turnover for NHS practices is recorded as 111.90% the number is skewed by a partnership sale that took place internally. Had it not been for that unusually low sale price, the overall turnover for NHS practices in the Midlands would have been higher than private and mixed practices. This goes to show that goodwill results should always be taken with a pinch of salt, as an irregularity can distort the numbers.

Altogether, our mid year goodwill results have revealed a number of interesting trends that will play a huge part in practice sales and acquisitions. For further insight or for details on how these changes could affect you, call the team at Dental Elite.

For more information on Dental Elite visit www.dentalelite.co.uk, email info@dentalelite.co.uk or call 01788 545 900


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