Specialist business property adviser, Christie & Co, has released its annual Dental Market Review report, which evaluates the UK dental market in 2021 and the first half of 2022. It focuses on pricing trends and funding, private sector performance, the NHS market in England, Scotland, and Wales, and shares an insider view on market sentiment from some of the sector’s leading operators.
Christie & Co, which advised on, valued, or sold over £925 million in dental practice value in 2021, notes the resilience of the dental sector and the rapid recovery of the transactional market over the last 12 months.
Demand & pricing
Demand is strong from independent, corporate and group purchasers, particularly for larger private or predominately private practices, yet appetite continues from a range of buyer types. Including the corporates, dental groups and independent dental practice owners.
Appetite for the new orthodontic contracts has been strong, particularly amongst corporate operators. Limited supply of these opportunities has resulted in competitive bidding, with the same corporate buyers looking further afield.
Christie & Co’s annual price index is reflective of a pre-pandemic era, with a noticeable increase in demand for practices in Wales and Ireland, where better value is available away from the traditional ‘hot spots’ of London and the South East.
Demand is strong for NHS practices in Wales
Demand strengthened for NHS dental practices in Wales, where the reforms are generally viewed as being progressive and popular with the profession. This is in marked contrast to England, where the activity-based system remains in place for the foreseeable future despite huge pressure from the profession for reform.
Operational review and sentiment
Christie & Co interviewed a cross-section of corporate and independent operators to gain insight into how their businesses have fared and their sentiment for the year ahead. When asked “How have operating conditions been for you over the last 18 months”, 65 per cent said they have improved, 25 per cent said they are broadly the same, and 10 per cent said they have deteriorated.
In response to the question, “What has the rate of like-for-like growth been in private revenue over the last 12 months?”, 45 per cent said more than 10 per cent, 40 per cent said between 5 and 10 per cent, and 15 per cent said less than 5 per cent. Key growth drivers for this include the continued high demand for cosmetic and aesthetic treatments, patients being more aware of oral health, the access crisis in NHS dentistry, the increase in demand for bigger treatments, digital workflows which are driving efficiencies and better results, and more flexible pricing which enables an increase in fees.
About 50 per cent of those questioned felt the rate of revenue growth was declining, which suggests that, overall, dental spend is greater but pent-up demand might be levelling off.
Before 2021, the average time from offer accepted to exchange was 233 days. This decreased by 19 per cent to an average of 188 days in 2021 and H1 2022.
In England, fully private practices which are share sales typically transact the quickest, whilst asset transactions involving the transfer on an NHS contract take the longest. Other variables include the efficiency of the due diligence process and the CQC registration process which, for an asset deal, takes a minimum of three months.
The report concludes with the analysis of the dental market funding landscape by Christie & Co’s sister company, Christie Finance. It notes that the dental sector continues to receive encouraging support from lenders, with banks looking positively at NHS, mixed, and purely private practices. Historic performance of the practice, together with the experience of the buyer, continue to be the main driving factors for lenders, with the availability of Associates remaining a key concern
Paul Graham, Head of Dental at Christie & Co, comments, “Dentistry continues to be a highly attractive sector for investors, helped by the increased awareness of oral health and the boom in cosmetic and aesthetic treatments. There has been a noticeable increase in demand for practices in Wales, with those with NHS contracts and that are in or close to major population centres being of particular interest. Despite some significant headwinds – not least rising interest rates, geopolitical and economic uncertainty and increasing workforce challenges within the profession – the market has remained robust.“
To read the full ‘Dental Market Review 2022’ report, visit: https://www.christie.com/news-resources/publications/dental-market-review/