Goodwill Values Reflect Uncertain Mood
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- Published: Wednesday, 20 September 2023 08:16
- Written by Peter Ingle
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Amidst the turmoil of a global pandemic, war in Europe, the ejection of two prime ministers in a year, as well as record highs for inflation and interest rates, UK dental practice goodwill values have remained robust.
The high value placed upon NHS contracts in valuations, and prices achieved, has increasingly appeared out of step with a profession that is moving away from NHS work. The latest goodwill survey from the National Association of Specialist Dental Accountants and Lawyers (NASDAL) may be an indication that the impressive resilience of NHS goodwill is now coming under pressure.
The survey is based on data derived from practices bought or sold by NASDAL members’ clients in the period that covers the quarter ending 30th April 2023 and includes valuations as well as deals completed.
Overall, the period saw a market that is continuing to do well. Goodwill values stayed steady at 151% as a percentage of gross fees - very similar to the 156% of the previous quarter. However, NHS practice values did appear to fall back sharply with values of 133% as a percentage of gross fees - down from 163% in the quarter ending 31st January 2023. NASDAL will not be alone in watching to see if this becomes a trend. In contrast, values for private and mixed practices in this quarter were almost identical to the last - 145% and 160% respectively versus 143% and 162% in the last quarter.
There was a big rise in valuations - 175% as a percentage of gross fees compared to 116% previously. Of course, valuation may be a starting point for negotiation and it will be some months before the market knows if this has translated into real returns.
Johnny Minford, Principal of Minford Chartered Accountants and NASDAL Media Officer commented, “The practice sales market is still in good health. Profitable practices are selling and we have seen what I might consider to be more sensible pricing in recent months. The number of interest rate rises has possibly brought values down a touch but the longer term effect of this in bank lending is yet to be fully seen so we will see if this means higher values in the months to come.
“One phenomenon of note is that of the ‘Associate-led practice’. I have seen a number of practices marketed in this fashion as if the new buyer and Principal will have nothing to do? All good practices need motivated team members and Associates but also need considerable time and thought from the owner too.”
The goodwill figures come from accountant and lawyer members of NASDAL, who point out that as with any averages, their statistics should be treated as a guideline only.
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