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What’s in store for dental practices, through the eyes of the selling agent.

What’s in store for dental practices, through the eyes of the selling agent.

As Managing director of Christie & Co’s medical division and a dental specialist, Simon Hughes has been working the UK dental market for nearly a decade. In an exclusive interview with GDPUK he gave his insights into the current state of the ‘business of dentistry’ in what is an increasingly complex market for practice sales.

In terms of annual volume, on average each year the team carries out about 1000 practice appraisals for owners considering selling, a further 300 valuations for banks, and complete over 100 sales.

One notable recent sale is the renowned central London private practice owned by Dawood & Tanner which was sold following a confidential process, to Dentex. However, Simon Hughes was quick to point out that they are not just a seller of private practices or dealing with corporates. Having seen the speed with which individual dentists have progressed from their first ‘starter practice’ to a large group they are keen to establish relationships with dentists early in their careers. At the same time, they have worked closely with the private equity investors who have powered the dental corporates expansion.

In respect of the general market, the recent National Association of Specialist Dental Accountants and Lawyers (NASDAL) benchmarking report was comparatively downbeat. However Simon Hughes said that the appetite for dental practice acquisition remains, and the flow of funding to support deals is strong. The recently announced merger of Dentex and Portman was a good example, and even since then further acquisitions by Dentex had been agreed. The two businesses had been competing often for similar practices but had differing business models, with Dentex applying minimal corporate branding and offering a ‘partnership’ arrangement to former practice owners. It would be interesting to see which model would dominate in future, although the self-referral to the Competition and Markets Authority (CMA) would slow down completion of the merger.

On the subject of corporates many practice owners have wondered about the near magical effects on EBITDA multiples, depending on whether a practice was being sold on its own, or as part of a large group. Simon felt that this was a major driver for private equity involvement, and the hoped for secondary buy outs after 5 years or so could further increase the multiples involved. There were clear assumptions that scale would create value, as would the effective application of branding.

Looking into the future there was no question that the ability of DCPs to start courses of treatment would be very welcome, particularly in mixed and NHS practices, but that given the numbers available and training time it would be a few years before they had a significant impact. In the shorter term getting more overseas graduates onto the register was a priority. The recent marginal contractual changes, particularly around band 2, would also help. Asked if the twin trends towards DCPs and specialisation would squeeze out GDPs Simon envisaged hub and spoke arrangements where general practitioners would remain very much involved, and that in any case there would be a likely relative shortage of specialists and DCPs for some time yet.

Looking to the future, Simon believed that while corporates would continue to enlarge there would remain a place for independently owned practices, and that the increase in demand for private treatment would support them. Dentists were generally aiming to ‘go private’ earlier in their careers, a move encouraged both by the growth in demand for private work, and uncertainty about the NHS. Many first time buyers still looked for an NHS element, but with increased concerns about the contract, he envisaged lots of conversations around rebasing UDA targets.

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