MediEstates - Group buyers are driving practice values in the dental sector
Group buyers are driving practice values in the dental sector

Group buyers are driving practice values in the dental sector

Scott Gidman looks at why group buyers are able to offer higher multiples of EBITDA when purchasing dental practices

The market for buying and selling dental practices continues to evolve and the pattern of ownership, especially of group practices and mini-corporates, looks very different from even two or three years ago.

A highly competitive corporate market sees dentistry as a desirable investment opportunity, attracting private equity groups and driving goodwill values higher. Historically, large corporates bought practices at an astonishing rate, in part to create a group they knew could be sold at a profit in the future. However, in recent years this has changed markedly as corporates and group practices are now increasingly viewing dentistry as a long-term investment opportunity, resulting in an influx of new purchasers in the dental market.

One valuation won’t do
Those looking to purchase a dental practice in today’s market fall into two distinct categories – the individual dentist and the group/corporate buyer. This in turn means every practice on the market, large or small, NHS or private, needs to be valued in a distinct way, depending on the operational model of the prospective purchaser.

It is evident that different group buyers often have different acquisition criteria and therefore not any one practice opportunity will fit all

One valuation should be geared towards a potential owner occupier, where the principal dentist is assumed to be able to generate the majority of income at no cost to the business. An alternative valuation model aimed at the group/corporate buyer must also be considered where profit is generally lower, because the principal dentist must be replaced by associates and/or hygienists. The multiple of EBITDA (earnings before interest, tax, depreciation and amortisation) used for this type of modelling is likely to be higher when compared to the owner/ occupier model.

Aspiring owner/occupiers looking to buy a practice are generally reliant on bank funding, so the multiples that can be achieved are often governed by the banks’ lending criteria. With group purchasers who are supported by private equity and shareholders, there are no such constraints. Ultimately this allows them to invest using higher multiples of EBITDA.

What’s attracting the group buyer?
Mediestates is constantly analysing the dental market and capturing valuable information about what group buyers are looking to acquire. It is evident that different group buyers often have different acquisition criteria and therefore not any one practice opportunity will fit all. For example, a large NHS practice of three or more surgeries, which hasn’t yet achieved any private potential will be highly desirable to some of our group buyers. This type of practice has the potential to increase its private treatments, bringing immediate and additional revenue into the business, which in effect dilutes the multiple that has been paid for the practice in the first instance. By contrast, corporate interest in private practices has grown significantly over recent years mainly due to long-term uncertainty surrounding the impending NHS contract reform.

The location of the practice also has great significance for this type of buyer, especially in terms of staff recruitment. This is not only confined to the larger dental organisations but increasingly ‘midmarket’ buyers – mini-corporates and dentists looking to acquire more practices in strategic locations.

What is driving growth in the mid-market sector?
Following the influx of private equity investors into the sector, the market is becoming increasingly competitive resulting in higher multiples of EBITDA being achieved for dental practices. This growth is expected to continue into the foreseeable future given the healthy and significant return on investment versus other investment opportunities.

A highly competitive corporate market sees dentistry as a desirable investment opportunity, attracting private equity groups and driving goodwill values higher.

Whatever type of dental practice you are looking to buy or sell, Mediestates, one of the UK’s largest specialist dental practice brokers, can help. At any one time we are marketing over 130 dental practices and our specialist dental property experts can help you to find the perfect practice for your specific requirements.
Posted by: Scott Gidman on

General Buyer Terms 

This agreement is in relation to MediEstates Limited whose registered office is at 1st Floor, Pacific House, Stanier Way, Wyvern Business Park, Derby, DE21 6BF acting for and on behalf of our clients ("the Vendors"); and yourself (Buyer's Name) in relation for an introduction to a prospective sale of a business as a going concern. By registering through this agreement I agree to all terms set out below:

  1. Definitions
    In this Agreement the following terms and phrases shall have the following meaning unless the context otherwise requires:

    Dental Practice business providing dental care. This business is under the MediEstates Ltd sale terms.
    Confidential Information
    Means the actual Vendors identity and all confidential information in respect of the Business, including, but not limited to, any ideas, business methods, prices, accounts, finance, marketing, research, development, manpower plans, processes, market opportunities, intentions, design rights, product information, customer lists or details, employees’ details, trade secrets, computer systems and software, and other matters connected with the products or services manufactured, marketed, provided or obtained by the Vendor, and information concerning the Vendor’s relationships with actual or potential clients or customers and the needs and requirements of such clients’ or customers’ operations.
  2. Obligation of Confidentiality
    The Prospective Purchaser agrees to treat as confidential, information supplied by or on behalf of the Vendor in connection with the sale of the Business.
  3. Exclusions
    The obligation of confidentiality set out in clause 2 does not apply to:
    1. any information received from a third party who was legally free at the time of disclosure to disclose it;
    2. any information which was already lawfully in the Prospective Purchaser’s possession prior to receiving it from MediEstates Ltd on behalf of the Vendor; and
    3. any information which is in its entirety already in the public domain.
  4. Duties of Prospective Purchaser
    1. The Prospective Purchaser shall take such a reasonable security measures to protect the Confidential Information and trade secrets.
    2. The Prospective Purchaser shall not, without the prior written consent of the Vendor, permit any of the Confidential Information:
      1. to be disclosed, other than in confidence to its legal or professional advisors;
      2. to be copied or reproduced;
      3. to be commercially exploited in any way;
      4. to be used for any purpose other than in connection with the prospective purchase of the Business;
      5. MediEstates is registered under the Data Protection Act 2018. Upon Signing this agreement you agree to follow the legal obligations of this act to protect the details of the information supplied to you, with it no to be passed outside of the control of you the prospective purchaser.
    3. The Prospective Purchaser agrees to keep a record of Confidential Information received.
    4. The Prospective Purchaser will return to MediEstates or the Vendor all documents containing Confidential Information and all copies of those documents on demand at any time which are in its possession or under its control, and for this purpose the term “documents” includes computer discs and all other materials capable of storing data and information. The Prospective Purchaser agrees that such documents remain the property of the MediEstates on behalf of the Vendor.
    5. The Prospective Purchaser must not jeopardise or re-direct the sale under any circumstances.
    6. The Prospective Purchaser must not contact the Local Area Team or CCG regarding any practice sale, by any means of media unless written permission is granted from the Vendor.
    7. To carry out own due diligence on practice purchases and accepts that any information MediEstates has supplied is information provided by the vendor and is not responsible for its accuracy or completeness.
  5. This Agreement
    The existence of this Agreement and its terms are confidential and neither MediEstates nor the Purchaser may disclose anything about this Agreement or its subject matter or implementation to any person other than in confidence to their legal or professional advisers.
  6. Duties of Prospective Purchaser
    When buying Dental practices, finance is normally needed. Our organisation operated over more than one of the MediHoldings brand, by completing this from you agree that the information can be shared to our other organisations to avoid the need to register independently and provide the best possible service.

    MediEstates will refer you to the specialist dental lending team and MediFinancial who will contact the necessary banks, whom have preferential healthcare lending rates in some cases, to ascertain which funding is available to you.
    By signing this agreement you do not have to use any of the banks MediFinancial contact, it is just another service which we provide.
  7. Deposit for Dental Practice
    If you are interested in putting forward a formal offer in for a practice, once the offer is accepted there will be a deposit required to secure the practice sale which is dependant of the practice size. This deposit is held in a client account and will be returned to the buyer on completion of the practice sale. You the buyer, will be required to sign a deposit schedule which will cover the buyer and the seller in the event that the practice sale does not proceed.
  8. Changes to this Agreement
    Any changes made to this agreement must be authorised and signed by one of MediEstates Ltd Directors.
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