The Coronavirus pandemic has dominated the news over the course of this year. As we start to come out of lockdown, there are fears of a second wave over winter. Whilst that might happen whatever measures we take, hopefully we can be better prepared and are able to minimise the impact on all of us.
So what has the pandemic meant for the profession as a whole, apart from the complete lockdown of practices, with the economic and personal consequences which flowed from that? As we speak, practices have been able to open, but of course not under normal circumstances. The maximum number of patients who can be seen on a daily basis is very low, additional hygiene measures are required, and AGPs are still prevented in NHS practices. In turn, the profession is still being paid on a basis which is different from the norm, with mixed views on how appropriate the current payment structure is.
Since the lockdown relaxations began, we have had quite a number of clients who are principals tell us that they are looking to sell their practice. In many cases they are accelerating their sale plans by some years. It does appear that some have decided that they wish to sell due to doubts over the future, and the added stress which the pandemic has caused to business owners generally.
At the same time, we have seen a continued appetite from potential buyers, including the corporates who are still on the acquisition path despite the difficulties of the last few months. It therefore appears that the market for practices could be busy over the remainder of this year and into 2021.
There were some concerns around whether practice goodwill values would be prejudiced by the uncertainty which the pandemic has caused, but so far there aren’t many signs of that happening. Whether that will change, time will tell.
Those coming to the market now are in some cases debating whether to sell directly to a corporate, most having had direct approaches, or whether they should use the services of dental practice agent. This decision is ultimately a personal one, although I tend to think that undertaking marketing through an agent will ensure that the price achieved is maximised. Selling straight to a corporate or other buyer may bring a speedier conclusion of course, but it may not be the best result for the seller.
One area to take extra care on now is any element of deferred consideration, where only part of the price is paid at completion of the sale, and the balance at a later date. There are two issues here. The buyer may well have been depending upon the income of the practice to generate cash to pay the balance of the price. With the income of the profession being structured differently now (and who knows what it will look like in the future), there may be added uncertainty as to whether the buyer will have the necessary cash to pay the balance when the time comes.
In turn, in some cases the payment of the deferred part of the price is linked to the turnover of the practice over a particular period meeting specified targets. This is common in a sale to the corporates, for example. With the potential for future lockdowns should the virus escalate again, or future changes in NHS payment structure, there is now an extra element of risk to a seller which needs to be considered.
Finally, for those selling in the very near future, there are issues to address around list numbers and how the income of the practice will be maintained. This stems from the manner in which NHS practices are being paid, and is an issue which wasn’t present in the past. PSD are working on a solution for that, but once again being aware of that aspect is important in preparing for a sale (or indeed if you are a purchaser).
If nothing else, the pandemic has taught us that the future is unpredictable, and with that in mind, it isn’t surprising that there are signs that the market for dental practices will continue apace for the foreseeable future.