Thank you for joining us again for the second part of our Water cooler series and talking
about the Goodwill report that has been released, um,
which covers all dental transactions that Dental have acted on in the last fiscal year.
Um, so in this section we're gonna talk exclusively about sales to independent dentists,
and what we mean by that is people who are buying their 1st,
2nd or 3rd dental practise. Now, uh, first thing I think the biggest thing
for that is, by nature, these transactions tend to be smaller in size,
um, but also that doesn't mean saying that there's, there's any lesser competitive market.
No, and I think really what you'll see in the report is the report splits,
splits practises by really by size, so you have practises which are single operators,
so I may be a principal and a hygienist, and looking at the data,
then size practises achieve a lower multiple, um, and why do you think the reason is?
Uh, I think the reason is, is that, you know, bearing in mind that interest rates are still
higher than they were sort of 3 or 4 years ago, is there's gotta be a reason why someone's
purchasing it. Now, often at the lower end,
people are purchasing it to earn broadly the same, or sometimes even less than what they're
earning as an associate dentist. Um, so what that has to mean is that when it
comes to the valuation of goodwill, they pay less for the practise,
um, because there isn't a massive upside from the or sorry,
immediate upside, I should say, for when they buy the practise.
Whereas conversely, if you. Buying a slightly bigger practise,
you would expect to have some commercial upside almost immediately on acquisition.
Um, and for that reason, actually, for the first time this year,
the report does look at the upper and lower medians, um,
in terms of the independent data is to cos there is,
as you say, probably a market of two classes, um, that that occurs within that sub-sector,
um, because that owing to sort of the nature of the grouping practises where you're gonna earn
a profit and those that you want. Yeah, and,
and fundamentally it comes down to actually for the smaller end of the map.
do you benefit from being an owner or would you benefit from being an associate,
especially with associate pay in some areas if we look at the latest benchmarking report of
which we'll release one later in the year, is the average UDA value is,
is near enough 13 or 14 pounds.
You know, if you're out there as an individual doing 8000 UDAs and 500 private,
you're probably gonna be significantly better off.
So there needs to be some form of of compensation.
and that comes in terms of the multiple that you you pay for a smaller practise as opposed
to a large practise where you benefit from the clinical profit of multiple associates
delivering income. Yeah. And the other thing is of course we said in the
first, um, what do you call it that we did, um, with regard to how there isn't that much
regional disparity amongst the groups, it's actually conversely the opposite when you look
at independence. So if you look at it by multiples by way of
example, in London and the Southeast, people are paying on average 3.7 times for a dental
practise. You put.
That practise up in the northeast, they're paying 2.86%,
which is a good 25% difference by my very quick mental maths.
Uh, um, but in comparison to what, um, you would pay in a different area of the country.
So I think in the independent market, because it's a more emotional purchases and people are
more led because they're gonna work in the practise by,
you know, proximity to where they live, you do tend to find there are some big sort of swings
in regional disparities. And also, when looking at the multiples,
again, I would say to people, you know, don't just look at an average of.
Of what's demonstrated within the report, because in a large case if we look at NHS
practises, it's really based on your UDA rate, you know,
if you have a really strong UDA rate and you're in a good area and that is a very profitable
business, you know, you're likely multiple will be between 4 to 5.
So if you're just looking at 3.7 and thinking that's your value,
you could be significantly out as in terms of what the true value is of the business.
So like, like all of these reports is, is actually they're designed to give a guide on,
on how the market is shifting and certainly over the last 12 months we've seen a sizable
shift in terms of interest and multiples from 23, 24,
but I'd, I'd really recommend anybody out there listening is valuations are done on an
independent basis linked to growth potential, location, UDA rate,
profitability, risk and opportunity.
As opposed to just an average figure on a report, say,
from us or any other competitor. Yeah, that, uh,
and, and the reason for that is as we kind of alluded to,
I mean if you look at the Southwest, you know, some of the lower end was 1.2 times,
you know, in terms of as a multiple, because we do sell a lot of practises where,
you know, we've got swap practises which, you know, for argument's sake,
where they don't quite take off and we're selling sort of,
you know, 1 times or 1.1 times, you know, whereas conversely,
some of the big, you know, really strong stuff, you're selling for multiples of 5 and 5 and
beyond. So, um, there is that, those kind of swings.
So, uh, again, just to cover some headlines, the average sale price,
um, last year was 795,000, um, within this kind of sub-sector,
um, which was representative of about 135% of turnover.
But as Phil says, you know, these are all averages, there's a lot of deals in here that
swing those kind of multiples, um, and it does vary based on the area of the country.
So if you are interested in evaluation, um, then you can drop us a line on our website,
um, or you can download the full Goodwill report, um,
on the link at the bottom of the screen.