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Dental Update

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The dental market continues to be highly active with a mix of NHS and private practices coming on the market and generally being acquired quickly through a competitive marketplace. There is significant demand to acquire both private and NHS practices. 

Increasingly dental practices are seen to be a sensible investment, with family members often providing funding to assist purchases. There is high confidence in the sector. The view in the profession is that the current and any future UK government are likely to continue to consider oral hygiene an important issue. Continued Bank enthusiasm for dental practices means Bank lending is unlikely be at risk in comparison with other healthcare areas.

The current NHS funding system came into play in 2006 and is estimated to be worth 5.8 billion per annum. This is expected to increase to around 6.27 billion over the next 3 years, representing around 8% growth over 3 years. The current system is under review and expected to change in the next few years with current General Dental Services (GDS) Contracts likely to be reviewed in 2016. The new Contracts are anticipated to have a greater focus on preventative care.

The private practice sector of dentistry has seen more limited growth over the last few years as a result of the economic downturn. Many practices being wholly reliant on private patients have seen a reduction in turnover. Income is generally derived from 2 sources; private paying individuals (known as ‘fee per item’) and insurance backed schemes such as Denplan where patients pay a monthly fee which covers a pre-determined level of dental care.

There is a broad range of buyers with no archetypal profile for prospective purchasers. Purchasers can be first time buyers, established practitioners looking to acquire an additional practice, small groups looking to expand moving up to corporate enterprises seeking to develop their portfolio.
There is currently a shortage of practices coming onto the market which is driving up prices, and leading to competitive bidding over those that do come on the market with often multiple offers being made on individual practices. Common factors leading to the sale of practices include retirement, ill health, change of personal circumstances, partnership break-up or opportunities to trade up or down.

NHS practices are often seen as a safer investment. Once the practice GDS Contract has been successfully transferred to the buyer, a defined and regular income stream is pretty much guaranteed as long as the buyer can maintain UDA activity at the required levels. The high demand for NHS practices may have led to buyers increasingly turning to acquiring private practices, particularly following the economic recovery which also makes those practices more desirable. This can be a riskier prospect, as a buyer must be confident that he will be inheriting all of the goodwill of the seller in order to maintain the practice’s income stream. If this is done successfully the returns can be greater. With the demand for NHS practices as it is, it appears likely that more buyers will be turning to private practices. 

Overall the dental sector is extremely active at present with high demand for practices, secure income streams for practitioners and no obvious factors which are likely to affect the market in the short term. This market buoyancy is likely to continue to generate a high demand for legal services specialising in this sector.

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