Category: Dental Practice Sales

The last 3 years have seen unprecedented change in the UK and European Dental markets.

Whilst we have seen increasing consolidation across the UK market, across Europe a similar trend is occurring.

We feel we are at the early stages of consolidation of the complete European dental industry. Investors are seeing that there are considerable efficiencies and gains to be had from scale and consolidation. However, getting this right is not easy.

In fact, we have seen in the UK and European markets some of the early investors struggle to build the large successful dental corporates they aspired to do so.

For every success story, there have been several casualties over the last few years.

A Fragmented Market

Dentistry remains heavily fragmented across Europe, yet the size of the Dental services market is substantial, and growing. This presents a prime opportunity for consolidation.

Increasing regulation, dentists reaching retirement age and a growing number of female dentists are changing the structure of how dentistry is practiced.

Strategic investors and private equity see these changes as an opportunity, offering scope to acquire, consolidate, improve efficiencies, and sell at greater multiples.

The UK Dental Market

Approximately 1,400 practices out of 11,000 dental practices across the UK belong to Dental Body Corporates. We are seeing small owner managed groups emerge, seeking to acquire further practices, and then exiting with a sale to larger dental groups.

Recent significant deals include the purchase of Southern Dental by Swiss based Private Equity firm, Jacobs Holding. Interestingly, Jacobs Holding owns a dental group in Scandinavia too.

One of the larger deals of 2016 was the purchase of Oasis Healthcare by BUPA. Again, interestingly, BUPA own Sanitas, a dental chain in Spain.
Sources suggest that MyDentist, the largest Dental Body Corporate in Europe, are currently not acquiring additional practices whilst apparently targeting operational and delivery challenges.

This presents an opportunity for a buy and build project delivered by existing and new entry investors.

In the last 12 months, the team at Samera have now begun working with a significant number of new investor groups, and we anticipate this trend to continue as investors appetite for the UK dental market grows.

The acquisitions sought by groups are highly driven by profit. Investors are always looking for individual practices or dental groups with a strong possibility of integrating easily into their existing groups.

Costs savings such as materials, labs, wages, clinical waste and other practice overheads are typically achieved in the first year post acquisition and profit improvements plans start taking place early on.

The European Dental Markets

As we have witnessed in the UK the most successful dental groups are the Groups that grew without losing touch with their locality and retained dentists and support staff post acquisition.

How to successfully build a branded dental group

Building a pan- European Group is a new and very attractive proposition and one that could work using similar principles as the successful UK Groups.

However, we feel there are a few important steps any growing dental corporate must master if they are going to succeed in building a successful branded dental group.

Centralising Head Office overheads

Through the use of a shared service centre, such groups can manage centralised costs well, but at the same time negotiate better discounts with suppliers through economies of scale. In addition, with scale comes a certain element of power, enabling larger groups to negotiate stronger lease terms in better locations, whilst offering a stronger covenant to and potential landlord.

The use of technology

Dentistry is evolving rapidly in the space of technology. Whilst many small dental practices use third party dental laboratories to provide crowns and other laboratory related work, we foresee the larger groups will acquire such laboratories so everything can be produced “in-house”, thus increasing the groups’ profit margins.

Hiring and retaining quality dentists

We feel it is imperative that such growing groups build a business that really supports their dentists and hygienists with their careers. The patient-dentist relationship is a very important relationship, and we have seen numerous cases of groups being rather heavy handed in their approach to professional team members, which has seen patients leave and goodwill destroyed very quickly. In order to build a successful branded dental group, at the heart of the business has to be its people, and keeping them happy. A failure to do so, will be the downfall for any ambitious dental group.

Building a brand

The last few years has seen Dentistry become a much more brand-oriented industry. Patients and consumers are attracted to strong brands, and we feel this will continue to grow in the Dental sector.

For further information on marketing a dental practice, check out our Learning Center here.

Recent Deals

In the last 2 years across Europe, DentalPro in Italy acquired Dentadent and Gruppo Giovanni Bona before selling to BC Partners (Bencis Capital Partners).

Elsewhere in Europe Vitaldent in Spain was acquired by JB Capital.
Jacobs Holdings from Switzerland, is rapidly growing their presence in Northern Europe via acquisitions of Colosseum Smile and Southern Dental.

What Next?

As seasoned experts of the UK and European Dental market, we feel the market possesses all the necessary ingredients for further consolidation.
The fragmented nature of the market, increasing private equity and strategic interest in the sector, and the changing fundamentals of the actual market place across Europe, highlight that the opportunity for further consolidation is considerable.

How Samera can help

Samera Practice Sales is part of Samera Business Advisors, the leading professional services group for Dentists.

Through our close contact with Dentists, Dental groups, and both buyers and sellers across the UK and Europe, we are perfectly positioned to assist.
Samera work with a number of Dental groups and growing Private Equity funded groups, so if you are seeking assistance on either the buy or sell side, we can help you.

Over the years we have grown strong connections not only in the UK and Ireland, but also in Southern Europe too.

Our main qualities are being proactive, efficient, making things happen and our multilingual and specialist team that can be your conduit to Pan- European consolidation plans.

We are currently in the last quarter of the year and the dental market is very active, with a great demand for all types of dental practices in the UK.
The NHS contract is still considered a great option, with its “evergreen” status ensuring high recurring revenue and quality of earnings. Meanwhile, private practices are also achieving great completion prices and demand for these types of practices is on the rise. Current figures suggest around 19% of dental patients currently receive wholly private care.

Approximately 400 practices are coming to market every year and the UK dental market is highly fragmented with around 16% of the total practices in the UK owned by corporate groups. Currently, we see completion prices averaging between x6 and x7 EBITDA for single sites practices.

Dental groups with an EBITDA in excess of £1.5m can be sold at higher multiples, but we are rarely seeing independent single sites selling above x7 EBITDA.

Best way to maximise the sale value

At Samera, we feel the best way to maximise the sale value is by having a competitive sale process and approaching the market with the true value.

Increasingly, buyers are scrutinizing contract performance rather than NHS contract value, analysing statements of activity and QOF for the quality of delivery of the contract, as well as looking at each associates delivery of UDAs and private income for sustainability. Clearly, an associate delivering 12,000 UDAs per year is a risk, and a low UDA value sub £23 is also a risk as it represents a low-profit-margin, especially in areas where it is harder to recruit.

Some of the large groups are not as active as they were 3 years ago on the acquisitions front, allowing an opportunity for well funded other buyers to acquire practices that in the past would have been approached and acquired directly by large groups.

Whilst in many ways it may still be a seller’s market, the smarter well-funded buyers are questioning valuations now more than ever. Many of the expanding groups are acquiring with the view to be able to sell their larger group in a few years at a higher multiple than what they paid for it. By paying over the odds, now, makes it a pointless exercise if they overpay – in their eyes.

Make your money when you buy

As any savvy investor clearly knows, you make your money when you buy – not when you sell!

Therefore, it is imperative, that any seller presents their practice well, transparently, and with realistic expectations of what they can expect rather than a valuation that is way beyond the market norms. Whilst it may feel great to be told by a keen broker that your practice will sell at record levels, the savvier buyers learn quickly who to work with and what value to believe.

If sellers expectations are set too high, many months can be wasted and credibility from strong buyers is lost too.

Trust plays such an important part of the deal.

Remember, anyone can make assumptions and add thousands of ££ to an `adjusted` EBITDA, but the danger is to lose credibility in the marketplace and to put the sellers in a vulnerable position.

We feel valuers have a responsibility to value businesses accurately. They also need to discuss with buyers and sellers the real potential that can add value and increase the price, and make real financial adjustments that will be sustainable once the sale is completed.

There are many types of buyers in the actual market, some whom do not need to rely heavily on bank loans, such as corporate buyers, whilst some others might be able to offer more clinical flexibility post completion such as individual or multi-sites owners.

It is common to see part of the price paid on a deferred basis, predominantly in the sale of private dental practices, or in relation to the private income of the practice, over a period of time and usually linked to the performance of the practice.

It is always advisable to have a conversation with a specialist dental sales agent.

Free Dental Practice Valuations with Samera

Our agents at Samera always try to match the right practice with the right buyer, for the right price and terms. If you are thinking about selling or perhaps maybe considering this in a few years check out our Samera Practice Valuation – it has been designed for dentists planning their exit in a few years.

For an accurate market appraisal of your practice, get in touch with one of our friendly and professional specialists.

Consolidation growth across the UK and European Dental markets

The last 3 years have seen an unprecedented change in the UK and European Dental markets.

Whilst we have seen increasing consolidation across the UK market, across Europe a similar trend is occurring.

We feel we are at the early stages of consolidation of the complete European dental industry. Investors are seeing that there are considerable efficiencies and gains to be had from scale and consolidation. However, getting this right is not easy.

In fact, we have seen in the UK and European markets some of the early investors struggle to build the large successful dental corporates they aspired to do so.

For every success story, there have been several casualties over the last few years.

A fragmented dental market across Europe

Dentistry remains heavily fragmented across Europe, yet the size of the Dental services market is substantial and growing. This presents a prime opportunity for consolidation.

Increasing regulation, dentists reaching retirement age and a growing number of female dentists are changing the structure of how dentistry is practised.

Strategic investors and private equity see these changes as an opportunity, offering scope to acquire, consolidate, improve efficiencies, and sell at greater multiples.

The UK dental market in the last 2 years

Approximately 1,400 practices out of 11,000 dental practices across the UK belong to Dental Body Corporates. We are seeing small owner managed groups emerge, seeking to acquire further practices, and then exiting with a sale to larger dental groups.

Recent significant deals include the purchase of Southern Dental by Swiss-based Private Equity firm, Jacobs Holding. Interestingly, Jacobs Holding owns a dental group in Scandinavia too.

One of the larger deals of 2016 was the purchase of Oasis Healthcare by BUPA. Again, interestingly, BUPA own Sanitas, a dental chain in Spain.
Sources suggest that MyDentist, the largest Dental Body Corporate in Europe, are currently not acquiring additional practices whilst apparently targeting operational and delivery challenges.

This presents an opportunity for a buy and build project delivered by existing and new entry investors.

In the last 12 months, the team at Samera have now begun working with a significant number of new investor groups, and we anticipate this trend to continue as investors appetite for the UK dental market grows.

The acquisitions sought by groups are highly driven by profit. Investors are always looking for individual practices or dental groups with a strong possibility of integrating easily into their existing groups.

Costs savings such as materials, labs, wages, clinical waste and other practice overheads are typically achieved in the first year post-acquisition and profit improvements plans start taking place early on. 

The European dental markets

As we have witnessed in the UK the most successful dental groups are the Groups that grew without losing touch with their locality and retained dentists and support staff post-acquisition.

Building a pan- European Group is a new and very attractive proposition and one that could work using similar principles as the successful UK Groups. Retention of dentists, and acting local, along with a strong brand and ensuring efficiencies are obtained will be good starting point for further consolidation across Europe.

In the last 2 years across Europe, DentalPro in Italy acquired Dentadent and Gruppo Giovanni Bona before selling to BC Partners (Bencis Capital Partners).

Elsewhere in Europe Vitaldent in Spain was acquired by JB Capital.

Whilst, Jacobs Holdings from Switzerland, is rapidly growing their presence in Northern Europe via the acquisitions of Colosseum Smile and Southern Dental. 

What next for the European Dental Markets?

As seasoned experts in the UK and European Dental market, we feel the market possesses all the necessary ingredients for further consolidation.

The fragmented nature of the market, increasing private equity and strategic interest in the sector, and the changing fundamentals of the actual marketplace across Europe, highlight that the opportunity for further consolidation is considerable.

How Samera can help 

Samera Practice Sales is part of Samera Healthcare Advisors, the leading professional services group for Dentists.

Through our close contact with Dentists, Dental groups, and both buyers and sellers across the UK and Europe, we are perfectly positioned to assist.
Samera work with a number of Dental groups and a growing number of Private Equity funded groups, so if you are seeking assistance on either the buy or sell side, we can help you.

Over the years we have grown strong connections not only in the UK and Ireland but also in Southern Europe too.

Our main qualities are being proactive, efficient, making things happen and our multilingual and specialist team that can be your conduit to Pan- European consolidation plans.

Please get in touch with our expert team if you need assistance.

PANTA REI

“everything is changing”

We feel the dental market is showing cracks and valuations may peak this year, leading to falling practice values.

We expect 2017 to mark the end for the bull cycle and expect prices to drop by 2018.

Latest figures show that actual deal completion prices dropped by 3% from the previous year, for the first time since 2006.

Why Panta Rei

Now more than ever, we feel we need to look back and learn from our ancestors. Heraclitus was one of the greatest philosophers of ancient Greece. His philosophy “Panta Rei”, literally meaning ‘everything flows’ or everything is constantly changing and evolving, although 2500 years old, is relevant to UK Dental Practice values. We strongly feel that valuations of Dental practices will peak this year, and drop by 2018.

A huge slowdown in Corporate Dental Acquisitions

Southern Dental and Mydentist, two of the most active acquirers in the last few years have now stopped buying practices. In fact, we believe they are trying to sell some of their practices.

Oasis, who are in the process of selling to BUPA, have also slowed down their acquisitions.

We believe, all this Dental Corporate inactivity will have a negative impact on dental practice valuations in the long term, and values will fall.

Brexit

Brexit means exit, but for the dental market it also means difficulty in recruiting an EU dental work force which will subsequently affect practices in less desirable or hard to reach areas. 

New NHS Contract

There appears to be two trends of thoughts in regards to the proposed NHS contract reforms.

One being that 2018 could be the year of change, the other that changes will take place but not until at least 2020.

Regardless of when this is going to take place, the view is that practice owners are likely to suffer with an increased cost of running their NHS practices. Higher costs ultimately means a lower valuation.

The NHS proposed contract reforms are on the horizon and could have a negative impact on deal completion prices. 

Who will be affected?

The first to be affected could be owners of groups of 5-7 practices who are considering selling as they could lose some of their potential buyers that were willing to pay good prices for their group.

Some group owners are following the larger corporates strategy and are selling some of their practices and looking at “tidying up” their organisations structure or implementing a refinancing exercise. 

Secondly, we feel this will have a knock-on effect on goodwill valuations across the UK, as some of the larger buyers diminish and concerns about the NHS contract arise.

Why now is a good time to sell

We are currently supporting a number of clients that are thinking ahead and selling their NHS or mixed NHS practices, capitalising on their hard work and setting up smaller private practices elsewhere.

There are over 50 small groups (10 to 35 sites) still willing to spend their yearly budget on practices that fit their selection criteria, with one of the most important criteria being location, with hard to reach areas struggling to recruit a workforce especially from abroad.

A small number of practices that are in a good strategic location, for example those right in the middle of a cluster of an existing group, should still sell for a relatively good value, but for the others we feel that prices could potentially drop in the next 12-18 months because of the lack of activity from larger and busier buyers and of the increasing difficulties in recruiting dentists and support staff from abroad.

When you add this to the proposed upcoming NHS dental contract reforms, it is evident that the game is changing and prices will fall, “Panta Rei”.
We feel being a step ahead can prevent a potentially stressful situation and one of the most important factors to ensure you get the best deal is the timing of your sale. 

Now could be the best time for you to sell.

If you are considering a sale, please contact the friendly Samera Practice Sales team on 0207 100 8788 or email us on [email protected] to arrange your free, professional , confidential and non-committal valuation report.

How much is your practice worth?

If you are still not sure but want a good idea of how much your practice is worth, please complete contact us on: [email protected]

Post referendum update.

It’s been over 2 months since the UK took the decision to Brexit. We have seen some instability in house price valuations, whilst the FTSE remains very strong, but what about UK Dental Practice Valuations?

Perhaps its too early to say, but since the Brexit vote and up to the end of August , compared to the previous 3 months, we have seen an increase in valuation services by 20% , a decrease in *EU citizens viewing practices by 30% and an increase in overall potential buyers viewing practices by 10% (*living in the UK for the last 5 years).

From our experience, it really is business as usual and we are most definitely busier than pre-Brexit. Whilst much negotiation needs to be done in respect of the UK’s exit from the EU, in the Dental sector, the lowering of the UK base rate has only provided further support for people wanting to buy practices.

Who is actually busy buying practices?

Small, medium and large size Corporates are busier than ever, whilst first time buyers and second time buyers are also keen on buying too. In addition, we are seeing well funded new investors entering the Dental market, to build new corporate chains for buy and build projects.
Currently, the demand for dental practices is at a record high, with a very limited supply available.

Every £1000 in profit, will increase the value of your practice by £6000

The current average purchase multiple across all single practice types is x5.78 x EBITDA , meaning that for every £1 that a practice owner is able to save and add to the profit line this equates to approximately £6 more on the valuation. In essence, for every extra £1000 profit your business makes, translates into an increase in the valuation by about £6000.

So for those considering a sale in the short to medium term, to maximise the valuation price, the focus has to be on improving the profitability of your practice.

Free Practice Valuations if you are thinking about selling

At Samera Practice Sales, we provide a free valuation service for anyone thinking about selling their practice now or in the future.

Contact us today!