What to look out for if you’re thinking of selling in 2023

If you are considering the sale of your practice within the next five years, it is never too soon to be engaging in a conversation with a specialist, RICS-registered broker.  

A benefit of this is that, ahead of the sale, the broker can work with you to understand your objectives and guide you on areas that need to be improved to enhance the demand and value of your practice. 

So, start by having a chat with an appropriate agent about your plans to sell. The agent should provide you with some general advice about the market in your area, the type of buyer you might want to look for, and give some general pricing parameters. They should also be able to showcase their services and credentials.  

Bear in mind that working with a specialist sales broker isn’t just about gaining access to potential buyers, although that is, of course, significant. Negotiating the post-completion terms in a dental sale is a highly sensitive and specialist area, and experience has taught us at Christie & Co that the devil is in the detail.  

The stark truth is that sellers dealing directly with a buyer are highly likely to receive unfavourable and unrealistic conditions attached to a mediocre offer.  

It’s even worse for those who ‘sell their practice free of charge’, as the sales agent often takes a fee from the buyer, which is a clear conflict of interest.  

Outlook 

Despite the economy taking a significant knock, especially in the second half of 2022, it’s fair to say the dental market and transactional activity remained robust. 

Taking stock and reviewing the last 12 months with a bit of context and levelheadedness is important. This will allow for a more informed outlook of what is likely to come next in the dental market. 

There is a lot of noise about practice values crashing and demand from buyers decreasing, but our figures tell a different story. To provide a snapshot of where we find ourselves, from 2021 to 2022, the aggregate offer value received at Christie & Co increased by 48% to £930m+. 

In addition, in our Dental Market Review 2022, we reported a 24% increase in buyers registering their interest in acquiring a dental practice, so it’s clear that the appetite for businesses is there. 

 Market predictions for 2023 

We have been busy putting together our company-wide Business Outlook 2023 report (available from 19 January at christie.com), and, offering readers a little preview, it seems clear that high demand for practices, especially in the private sector, will remain. 

As for NHS dentistry, we anticipate that practices with NHS contracts will be subject to more scrutiny by purchasers and lenders in respect of UDA delivery and practice economics. Demand will continue to be strong for those with higher UDA rates and a good track record of delivery. 

In general, the market will become more quality-driven and practices that are future-proofed will continue to attract premium prices as demand continues to exceed supply for the best assets.  

Additionally, the mix of buyer profiles will remain active and continue their acquisitions but, with a more microscopic approach to viability and performance of the opportunity, whilst corporate operators and other dental groups will continue to seek specialist practices to drive internal referral income.  

In terms of financing, high street banks will continue to lend in the sector. Funding is being stress tested at the highest rate we’ve seen in over a decade, so a deal that worked before the interest base rises will continue to be viable for robust practices with a financially secure buyer. 

It is important to note, however, that under the strain of the current economic market, a looming recession, and an ongoing recruitment struggle in the sector, lenders are generally taking a more cautious approach, so are particularly favouring robust practices that can withstand a stressed interest rate. 

The forthcoming year in focus   

Completion volumes rose by 23% from 2021 to 2022, and a staggering 124% from 2018 to 2022, illustrating the increasing demand for quality practices. 

Bank valuation instructions have also hit an all-time high, with a significant increase in instructions in 2022, which we anticipate continuing into 2023. 

So, dentistry continues to be a highly attractive sector for investors, helped by the increased awareness of oral health and the boom in cosmetic and aesthetic treatments. Whilst it is true that any tightening of consumer spending may well affect cosmetic and aesthetic revenues, general treatments remain needs-based and therefore in demand.  

The fact remains that demand from buyers outstrips current supply and, as such, we anticipate that this favourable ratio will continue.  

As seen on page 10 of BDJ in Practice's January 2023 magazine.

For more on the dental market, our Business Outlook 2023 report here.

If you are considering selling your dental practice, or buying one in the next few years, please get in touch - email paul.graham@christie.com or call 07739 876 621.