The Practice Sales Market – shifting demands

With all the turmoil caused by the pandemic, the Truss government, rising energy prices and the war in Ukraine, the economic landscape has seen some change over the last few years. So how has all this affected the practice sales market? Practice Plan Sales and Marketing Director, Nigel Jones, spoke to MD of Frank Taylor and Associates, Lis Hughes, to find out more about how things are faring for dentists wanting to buy or sell a practice.

Nigel Jones: I've watched FTA grow since I joined Practice Plan in 2008 and it's been very impressive. However, it's been an ever-changing world during that time, and we find ourselves in the midst of a great deal of change and uncertainty at the moment. So, what's your take on the current dental market and your specialist area within that, the sales market?

Lis Hughes: For as long as I can remember, it's been a seller's market and the demand has always been great. In 2008 when the banks stopped lending for quite a while, private dentistry took a hit during that time, but we saw the values of NHS practices going up because people could see the benefit of buying an NHS practice and the security of the income coming in. Throughout the past 15 years, we've had banks wanting to lend to dentists. Even in the current environment we still have banks who want to lend to dentists because dentistry is considered such a safe sector for the banks. In all the years I've been involved with practice sales, I've only dealt with two bankruptcy sales, and they both involved property portfolios as opposed to the dental practice itself.

Associates have always wanted to be practice owners, and that hasn't changed. But what we have seen in the past 12 months has been the challenge with interest rates. So, for people looking to buy, they have had to consider not just what it will cost them to buy a practice, but their own personal outgoings too such as utility bills, food etc. So, affordability's been a real question mark for a lot of our buyers, but it hasn't stopped the market.

However, it has softened. When we talk to people whose practices we valued perhaps two years ago, there has been a shift in the desire for certain types of practices, which has influenced the market. So, we have to go back to them and review our valuation.

Nigel: Indeed. Practice finances have been affected as much as any other sector. How is the shift in the market manifesting itself? What sort of things are people looking for now? We have been incredibly busy post-pandemic with NHS conversions as more dentists re-evaluated their working lives and what was important to them.

Lis: Lockdown gave practices the chance to focus on private dentistry as they only needed to deliver 20% of their NHS contract. This gave many dentists the opportunity to explore what private dentistry might be like for them. And when they went back to having to fulfil 100% of their NHS contract that affected their ability to do private work. So, we've seen a shift where some principals have said, “I want to focus on the private work and lose the NHS contract, or at least try to reduce it.”

However, what's really interesting is a lot of practice owners and potential practice owners have been concerned about their ability to find associates to fulfil their NHS contract. Which has proved a challenge. So, when people have considered buying a practice with a large NHS contract, or one in an area where recruitment has been difficult, they have been concerned that they may not be able to find dentists to fulfil the contract, leaving them at risk of huge clawback. So, attitudes towards what constitutes a desirable practice have changed. They’re no longer the same as in 2008.

Nigel: As I said, we're working with a lot of practices at the moment who are handing back their NHS contract. And in some cases, it's just because they've had enough. But for a lot of them, it's simply the practicality of trying to address that recruitment issue. So, they've given up and reached the conclusion they will not be able to recruit an NHS associate, and the only way they will be able to recruit more dentists is by offering them private positions. I assume that must be having some kind of an impact on the valuations of NHS practices.

Lis: Yes, there is an impact. Although we have seen recruitment become less of a concern over the past three or four months and it’s no longer top of the list of topics when I speak to practice owners. Unlike last year when it was the biggest issue they were facing.

The biggest challenge now is meeting Associates’ desires and aspirations. Now we rarely come across an associate who wants to work five days a week. And it’s also rare to find an associate who has an ambition to be an NHS dentist. And that's quite a difficult combination.

So, if you have a practice with a large contract where you have depended on associates to deliver it then that raises questions in the mind of a potential buyer as to whether they will be able to fulfil it. And that does affect the value because it's always about supply and demand. So, if there aren’t people who want to buy the contract, it will influence the value attributed to the contract.

Nigel: That makes sense. We’re certainly coming across the recruitment problems caused by Associates no longer wanting to work four and a half or five clinical days. We’re also seeing conversions being driven by the Associates in the practice who no longer want to carry out NHS work. From your point of view, when you are getting the particulars of practices in, are you seeing people working fewer hours, fewer days, fewer sessions?

Lis: Yes, absolutely. The challenge for dentists who own practices is, if they cannot find enough associates to do the work, then they have to do it themselves. I have several practice owners who have gone back in to do dentistry purely to fulfil the contract because they can't get other dentists to do it. And I have one dentist where his associates all do the private work and he does the NHS work, which is crazy. He's almost come out of retirement to do it because he wants to fulfil the contract before it gets sold.

Nigel: I've heard similar stories. It seems to be that what people have been aspiring to is private dentistry where they can work at a less pressured pace and then, towards the end of their careers, they find themselves going back to the treadmill, which must be quite a hard thing to take.

Lis: Yes, it must be. When people want to sell their business, they're either moving towards something, so that could be where they have great plans for their future, or they're moving away. And if they're moving away, it’s because they’re distressed.

We are now talking to more people who want to move away from the burden of practice ownership than those who say, “I've had such a great career. I now want to do X, Y, and Z and enjoy doing things in the future.” So, when I ask people what’s driving them to sell, for the majority, it's about being relieved of the burden of being a practice owner.

Nigel: That’s quite a sad state of affairs. Thank you for sharing your insight into the state of the market at the moment, Lis.

If you’re considering your options away from the NHS and are looking for a provider who will hold your hand through the process whilst moving at a pace that’s right for you, why not start the conversation  with Practice Plan on 01691 684165, or book your one-to-one NHS to private call today: practiceplan.co.uk/nhsvirtual

For more information visit the Practice Plan website: www.practiceplan.co.uk/nhs