Strong recovery predicted for the dental care market
Business property adviser Christie & Co has published its ‘Dental market review 2020/21’ analysing last year’s dental market and looking forward into 2021. It outlines pricing trends, funding for the sector, and market sentiment, with testimonials from sector operators.
The first national lockdown last March led to an instant and dramatic reduction in dental market activity but, as the profession slowly came to terms with the pandemic and the path to reopening practices became clearer, buyers tentatively re-engaged and, despite the challenges, Christie & Co said it completed more than £8.25 million of dental practice sales, all with a significant NHS element.
The lockdown period caused some surprising trends, such as an increase in enquiries from first-time buyers, who tended to be older, which suggests that more experienced associates were looking for greater security through practice ownership. Interestingly, during a period of market uncertainty, the average time from launching a new instruction to an offer being accepted reduced, from 12 weeks in 2019 to 10.5 weeks last year. Christie & Co speculated that this could have been due to vendors more readily accepting early offers in what were more challenging market conditions during the middle part of 2020.
Strong recovery from July onwards
Christie & Co interviewed a cross-section of corporate and independent operators to see how they adapted to the challenges of last year and how their businesses fared, along with their sentiment for the year ahead. The company found operators “pleasantly surprised” at the speed of recovery in demand for private dentistry, which could be attributed to several factors, not least a heightened awareness of personal appearance from video calls leading to a surge in demand for cosmetic and aesthetic dentistry, social orthodontics and implants.
Operators also reported that some NHS patients elected to receive private treatments as a result of longer waiting lists for appointments.
When asked how the pandemic impacted the economics of dentistry, 35% of owners said they now have higher private revenue than before Covid-19, confirming the very quick bounce back from last June when practices reopened. When compared with hygiene income, however, more than 80% stated that revenue is less than 50% recovered, reflecting the continued challenges of treating fewer patients.
However, 85% of owners questioned believed that revenue will have fully recovered by the half-way point this year.
Recruitment difficulties likely to remain
The shortage of quality associates has been problematical in recent years and, before the pandemic, led to recruitment becoming highly competitive and increased associate costs.
The closure of dental practices last March led to an instant shift in the supply and demand situation as many associates in private practices sought the security of the NHS and there was, for a short time, a surplus of associates. This seems to have been short-lived and, as practices reopened and private dentistry recovered quickly, the same pressures on recruitment returned to certain areas of the UK.
Rapid market recovery
Sale prices held up well last year, with pre-Covid-19 levels of demand returning this year for quality practices. Interestingly, there was a marginal increase in the average multiple (a key measure of value) paid for larger practices, in contrast to the average multiple paid for owner/principal-led practices which reduced slightly.
Deals were struck at an average of 103% of asking price in the post-lockdown period with no significant adjustment, compared with an average of 105% of asking price in Q1 2020, which confirms that demand for practices across the board returned quickly.
The report concludes with an analysis of the dental market funding landscape by Christie % Co’s business finance arm Christie Finance, which provided around £4 million of unsecured loans and asset finance to its dental clients last year, with a mean average deal size of £160,000.
Christie Finance said that, though most banks took a pragmatic approach and continued lending to the dental sector, lenders are now more cautious, and the pandemic has encouraged them to look even more carefully at finance proposals.
Christie & Co’s head of dental Paul Graham said: “It’s encouraging that sentiment is so positive, and dentistry has weathered the Covid-19 storm so well to date.”
David Ward, senior director and head of medical at Christie Finance, added: “Funding for dentists during the Covid-19 period has been challenging, but manageable. Lenders have tweaked their policies, but we are still very positive about dental funding in 2021.”
Date published: March 10, 2021