Dental Practices | Business Outlook 2020

The ownership landscape has continued to evolve with all of the largest dental companies now actively seeking to expand and/or improve their portfolios through mergers and acquisitions. A number of ‘mid-sized’ portfolios have taken on private equity investment during the course of 2019 and are now also competing for larger practices in both the NHS and private sectors.

Private equity continues to target the sector although price inflation in recent years and the lack of deal supply is making returns more challenging.

The shortage of Associates, as highlighted in our inaugural report into the Dental Industry (Staffing, Brexit and the Dentist Shortage 2018), remains a key challenge for the profession and shapes the expansion strategies of many corporates and multiple practice owners. This has led to buyers becoming more discerning in terms of location and practice type which has polarised demand for larger, better-quality practices in both NHS and Private segments.

One of the main features of the last few years has been the growth in the number of multiple practice owners, which continued in 2019. We now estimate that there are over 500 owners in the UK with more than 3 or more sites.

Many of these will be acquisition targets for larger companies, fuelling the continued consolidation that has become a feature of the market over the last few years. We are seeing an increase in prices being paid, driven by higher multiples of EBITDA to reflect the shortage of such opportunities and those that have high quality integrated portfolios with competent Management teams are attracting significant premiums.

Across the market we noted an increase in average sale price of 5.4%, with larger practices operating in the private sector growing at a faster rate than their NHS counterparts. Conversely, smaller NHS practices in more rural locations, and particularly those which have not fulfilled their UDA targets have generally fallen in value with pricing linked to actual performance rather than baseline contract value.

Christie & Co Market presence

Our market presence and transactional activity has increased year on year from a base in 2015 as we grow our team to reflect a more sophisticated and regionally diverse market  

Outlook for 2020 and Market predictions

We believe that the market will continue to perform well in 2020 with demand from both the independent and corporate sectors. Traditional lenders will support buyers and a number of new challenger Banks will enter the market. In general, Dentistry is viewed as very low risk.

• Continued demand for urban locations as corporate and expanding multiple operators target larger practices, particularly those with an EBITDA of £250,000+
• A likely increase in volume of NHS practices coming to market, as sellers seek to maximise their returns ahead of the potential contract reform
• UK price increases will encourage mature UK dental companies of scale to target pan-European opportunities where prices are lower, and the market is less mature
• Analysis of recent buyer trends confirms that 63.6% of dental practices sold by Christie & Co were to buyers who were living within 20 miles of the practice they acquired. This illustrates the importance of our regional network and in-depth knowledge of the local markets in which we work

Paul Graham

Head of Dental

T: 0131 524 3416

E: Paul.Graham@christie.com

Key transactions in 2019

• Houston Dental Deal – 44 surgeries across North Somerset and wider South West region 
• Project Logan, two large profitable mixed practices in West Yorkshire sold for more than 300% of turnover
• Total Dental Care – four practice located across London and the South East of England