Practice goodwill values – the top of the market?
The National Association of Specialist Dental Accountants and Lawyers (NASDAL) has released the results of its latest goodwill survey and it does appear that, following a number of years of impressive growth, there is now a levelling out of prices being paid.
Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, explained, “It certainly does appear that the ‘boom’ in the practice sales market may be on the wane. 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.”
Ray Goodman, managing director of Goodman Grant Solicitors Ltd, added, “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. 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.”
As in recent times, NHS practices are continuing to attract significant premiums. In the quarter to April 30, 2017, NHS practices sold at an average of 165 per cent of goodwill as a percentage of fee income, compared with the overall average of 137 per cent.
The goodwill figures are collated from accountant and lawyer members of NASDAL on a quarterly basis in order to give a useful guide to the practice sales market. These figures relate to the quarter ending April 30, 2017.
NASDAL reminds all that, as with any averages, these statistics should be treated as a guideline only.