The latest Goodwill Report from Dental Elite provides an up-to-the-minute overview of the dental practice sales market. With its insights useful for anyone looking to buy or sell a practice in the near future, Luke Moore – Co-founder of Dental Elite – summarises the key findings.
Overall, the volume of transactions completed in 2024/25 was significantly higher than in the previous financial year, which suggests that the previous uncertainty around interest rates has begun to settle. A broad acceptance that interest rates are falling – or, at the very least, are not rising any time soon – is driving this increased confidence to buy.
Another factor affecting the market is that many practices are re-mortgaging on the lower interest rates. This is supporting profitability and long-term financial stability of the businesses. On the ground, dental practices have grown in strength thanks to ongoing demand for their services, which is unlikely to reduce in the foreseeable future. All of this is making dentistry an attractive market for continued investment.
Who is buying and what are they looking for?
Just under 70% of practice transactions in the 2024/25 financial year were completed by independent buyers. This has remained steady in recent years, despite perceptions that groups and corporates buy far more than they do.
With regards to what type of practices are being sold, mixed businesses are top of the list. For the sake of the Goodwill Report, any practice offering more than 80% NHS services would be considered an NHS practice, and same for private. Mixed practices include any with a broader spread of NHS and private services.
With this in mind, it is fairly unusual to see highly successful fully NHS practices, with most operating with more than 20% private dentistry as this is where the key profitability is unlocked. While the NHS offering does bring patients through the door and the value of this is recognised, many patients will end up having some private treatment, boosting revenue. That said, having even a small NHS contract does provide sustainability of income, which is acknowledged by lenders for the benefit of potential buyers.
As such, it makes sense that mixed practices were the most common type of business being sold in the past 12 months. If and how this changes in the future, we will have to wait and see. Everything from NHS contract reform to the increasing popularity of patient payment plans and evolving private dentistry fees will all impact whether patients seek more NHS or private services in the coming years. The most important factor for any principals considering a sale in the next few years is to not change the business model too much. For example, selling an NHS contract could prevent the practice from going to market for several years because it will be in a state of flux for some time, making financial forecasts and valuations impossible.
The cost of business
The data for sales to independent buyers reported an average practice price of just under £792,711, achieving 135.92% of business turnover. This equated to an average Fair Maintainable Trade (FMT) multiple of 3.31 across different practice compositions. The highest multiples were recorded in London and the South East, Wales, and the Midlands, while the lowest were in the South West, the North West and the North East and Yorkshire.
For practices sold to groups, a national average EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) multiple of 7.16 was achieved across all tiers. The average sale price for Tier 1 buyers (those with 50+ practices) was £3,245,416, for Tier 2 (20+ practices) it was £3,484,090, Tier 3 (10+ practices) £1,341,010 and Tier 4 (4+ practices) £1,674,947. This price brackets suggest little competition at the higher end of the market, as buyers in these tiers are focusing on much larger transactions.
Side note – the sale of practices to independent and group buyers is calculated slightly differently, using multiples of FMT and EBITDA respectively to account for the cost of a full-time principal in the latter category.
The spotlight for vendors remains on optimising finances and practice value in the time before going to market. There are four key financial areas to manage carefully to avoid raising costs from impacting the business valuation at the point of sale. This excludes major overheads because, for the most part, there’s very little that can be done to reduce them. Those that can be monitored and optimised are: materials and lab fees, staff costs, and associate fees.
Takeaways
In conclusion, the dental practice market remains dynamic and competitive overall, driven by strong buyer demand and favourable lending terms. Independent buyers continue to dominate transactions, with a stable appetite for entry-level opportunities and particularly for mixed practices.
For anyone approaching a sale or acquisition in the next few years, preparation is key to a successful process. For advice on current market trends or ways in which to optimise your situation for the future, the experts at Dental Elite would be more than happy to help.
For more information on Dental Elite visit www.dentalelite.co.uk, email info@dentalelite.co.uk or call 01788 545 900
