Practice Values Plunge
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- Published: Monday, 03 October 2022 08:19
- Written by Peter Ingle
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Dental practice prices have appeared to be only capable of going one way. Prices of practices being sold, had been not just holding up but increasing, despite the effects of lockdowns and the added challenges of delivering dentistry since reopening.
The latest survey from the National Association of Specialist Dental Accountants and Lawyers, (NASDAL) shows a sharp change in the direction of travel for practice prices.
The newly published survey of Goodwill statistics covers the quarter ending 30th April 2022 and includes data on valuations as well as deals completed for practices that were bought or sold by NASDAL members’ clients.
The quarter showed a sharp reverse following successive increases in goodwill values. Overall, there was a substantial decrease in goodwill as a percentage of fee income in the quarter across all types of practice – deals averaged 143% of gross fees, down from 166% in the quarter to 31st January 2022.
There were variations across the types of practice. Private practices saw practice goodwill at 124% of gross fees, down from 155% in the last quarter. Mixed practices saw a dramatic decline from 189% to 132% Against this, NHS practices did see an increase from 141% to 178%
Specialist dental accountant, Mike Blenkharn, partner at UNW LLP compiles the goodwill survey. He said, “It is interesting to see a big fall back across many practice goodwill values. We can perhaps speculate that as the market returns to a bit more normality it should be expected that figures fall back a little. It also could be symptomatic of wider concerns in the economy as a whole.”
“We have seen a low number of NHS practices come to market this quarter which may have skewed that data somewhat and the rise. However, there is a lack of confidence in the market for NHS practices and it will therefore be interesting to see if this trend in goodwill values continues in future quarters.”
Volatility should perhaps be expected after the last three years. The conflicting effects of apparent high demand following lockdown and the often reported access issues should mean that practices are busy. Savings accumulated by lockdown “winners” and the demand for Zoom-ready smiles may now have worked through. Daily headlines on inflation and the rising cost of living will not have encouraged consumer confidence or discretionary spending.
NHS dependent practices, meanwhile, are now expected to hit 100% of their targets as many face staff shortages and spiralling costs. With the limited scope of contract reforms now confirmed, they too may face increased pressure on profits, and then valuations.
It also remains to be seen how the larger corporates and their private equity backers will cope with a sustained drop in practice values.
NASDAL reminds all that as with any averages, the survey statistics should be treated as a guideline only.
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