This week saw the latest results published from the NASDAL (National Association of Specialist Dental Accountants and Lawyers) Goodwill Survey statistics. In a normal world, these statistics are produced on a quarterly basis – however, 2020 has proved to be far from normal – hence six months delay since the last publication. This survey covers the period from 1st April to 30th September 2020 and is based on deals done (i.e. practices bought or sold by NASDAL members’ clients in the period).
As the graph illustrates, goodwill prices have held up very well. Goodwill as a percentage of fee income in the period across all types of practice averaged 141% of gross fees – only down from 159% from the quarter to January 2020 – the last pre-Covid quarter.
And, the level of deal activity is very much higher than many expected.
NHS Goodwill values were higher when compared to the previous quarter with 191% of gross fees across the six months to 166% of gross fees last time. Private goodwill values fell back to 114% of gross fees from 143% of gross last time. The big fallers were mixed practices – falling from 188% of gross fees in the quarter ending January 2020 to just 110% of gross fees this time.
What does this mean?
Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, said, “I have to say that both the level of deal activity and the pricing levels have surprised me. I was expecting to see a big drop in the number of practice sales coupled with a sharp fall in prices. In NASDAL members’ experience, there have been only limited price reductions and the corporates haven’t used Covid as an opportunity to negotiate lower deal values. It certainly does show that the UK dental practice sales market is not the nightmare that some commentators have suggested!
“We do know that many lenders are coming up with an increasing array of hoops for borrowers to go through – which puts cash buyers in a stronger position.
“We decided not to include valuations during this six month period as the amount of data was lower than usual, and valuations are invariably subjective, which is unhelpful during this period of uncertainty.
The goodwill figures are collated from accountant and lawyer members of NASDAL in order to give a useful guide to the practice sales market. These figures relate to the six months ending 30th September 2020.
NASDAL reminds all that as with any averages, these statistics should be treated as a guideline only.