Practice valuations falling
Practice valuations have continued to see a steep drop this year according to the latest NASDAL goodwill survey.
The latest goodwill survey has shown that valuations for practices have reached 135% goodwill as a percentage of fee income, which is actually a rise since the same time last year where valuations reached 124%, but a drop from the 163% peak we saw in October this year.
Despite this the percentage for deals actually completed saw a jump to 137%, from 116% in the previous quarter.
This reverses a downward trend that saw the percentage for deals completed drop from 125% in July 2016 to a low of 116% in January 2017.
‘It certainly does appear that the “boom” in the practice sales market may be on the wane,’ Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, said.
‘It is interesting to see the convergence of the valuations and deals done data – this could suggest that there is a realisation that prices are not going to continue to rise at the same rate.
‘It is worth noting though that the market is still rising, if perhaps more slowly.’
NHS practices are attracting significant premiums, averaging 165% goodwill as a percentage of fee income.
‘There are increasing numbers of new corporate buyers and private equity firms entering the market who will only pay what a practice is worth based upon a full and proper financial valuation,’ Ray Goodman, managing director of Goodman Grant Solicitors Ltd, said.
‘Whilst clearly there are instances where entrepreneurial young dentists will pay more to get the practice that they desire, the corporates won’t, and this has meant the market easing back a little.
‘The fact that there is more venture capital entering the market does illustrate that compared with other investments, dental practices are perceived to offer value even at these high levels.’