Goodwill values have soared over the last quarter, up 11% over the previous quarter to 138% of gross fees.
The latest National Association of Specialist Dental Accountants and Lawyers (NASDAL) goodwill survey has shown a huge jump in the gross fees achieved for private practices, up 51% in the last three months to an average of 107%, while NHS practices have seen a slower rise to 125%, up 3.4% in the same time.
‘Whilst it must be stressed that the EU referendum vote happened midway through the quarter, it does appear that the vote had at worse, no effect, or arguably a positive effect on the value of UK dental practices,’ Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, suggested.
Dark clouds on the horizon
NASDAL has warned there may be dark clouds on the horizon, however, with prices now at levels acquirers cannot afford.
London based NASDAL accountant, Ajay Patel of Ajay Associates, explained: ‘Goodwill values in the London and south east region in my view have now reached levels that mean many potential acquirers can no longer pass the affordability test.
‘Only those with substantial personal capital, private equity-backed dental companies or individuals with the help of “bank of Mum and Dad” can afford to acquire in many instances.
‘I have recently seen more and more potential acquirers, although meeting the banks serviceability test, fail the remuneration test, ie level of take home pay for the acquirer.
‘Projections in many instances demonstrate the acquirer would earn less after loan servicing cost than they do currently as associates.’