Christie & Co analyses UK dental sector in latest market report
Surge in 'squat' openings indicates robust demand trajectory in private dentistry
Specialist business property adviser, Christie & Co, has launched its Dental Market Review 2023 which offers a panoramic view of the UK dental business sector, spotlighting important areas, including sector ownership structures, evolving market dynamics, current pricing patterns, an insightful operational review, and an assessment of the current appetite of banks to lend to the sector.
SECTOR OWNERSHIP AND COMPOSITION
There has been a significant change in practice ownership amongst some of the larger operators, caused by mergers, acquisitions, and divestments since the broker’s 2022 review. Bolstered by the 2020 Use Classes Order modification, there’s been a surge in ‘squat’ openings, indicative of a robust demand trajectory in private dentistry. Currently, in the UK, there are around 12,600 dental practices with a diverse ownership matrix, which is still dominated by independents (62 per cent).
Our findings underscore a robust, positive trajectory for the dental sector
DEMAND & BUYER APPETITE
The repercussions of the September 2022 mini-budget, in particular the increase in the cost of capital, led numerous corporate operators to recalibrate, if not halt, their acquisition strategies. This caused a pronounced dip in market transaction volumes, accompanied by a marginal softening of EBITDA multiples in H1 2023.
Patient demand for general private dentistry remains resilient, offset slightly by a nuanced reduction in revenue, especially in elective specialist procedures, which are often linked to higher patient expenditure.
The market readjustment in H1 2023 bolstered the influx of fresh independent buyer inquiries at Christie & Co, with prospects drawn to the enhanced value propositions on offer. Concurrently, there’s been a marked uptick in emerging startups and dynamic ‘micro-corporates’ charting aggressive growth blueprints. Reaffirming the market’s vibrancy, seasoned dental operators who have greater confidence in the future performance of their existing businesses are, once again, seeking expansion opportunities.
Christie & Co’s buyer registrations grew by an impressive 12 per cent in 2022, and H1 2023 saw growth of a further 9 per cent. Notably, over a third of dental financing arranged through Christie Finance between July 2022 and July 2023 was for first-time buyers.
A key feature in the current market is undoubtedly escalating operational costs which, as a result, is leading various dental operators of scale to judiciously reassess their portfolios, culminating in strategic offloads. Such decisions can also stem from mega-mergers and ensuing directives from the Competition and Markets Authority (CMA). Although critics may hastily label such offloaded entities as ‘unsuccessful ventures,’ these practices garner significant demand. Invariably, these are acquired by astute independent operators, often with local knowledge and insight, who can inject vitality into both practices and teams. This transition bodes well for the dental community, bolstering both independent local and regional business ownership, as well as ensuring uninterrupted community access to vital dental services.
OPERATIONAL REVIEW AND SENTIMENT
In July 2023, Christie & Co interviewed a cross-section of dental operators, from prominent corporates to dynamic medium-sized entities, agile smaller groups, and independent practice leaders, to capture a holistic view of the industry sentiment.
The results were encouraging. When delving into the anticipated challenges for the dental workforce in the forthcoming year, a combined 90 per cent of respondents leaned towards positive or neutral sentiments. Specifically, an uplifting 45 per cent were optimistic while 45 per cent held balanced, neutral perspectives.
Exploring the views on NHS Dentistry in England, a cumulative 82 per cent of the respondents radiated either positive or neutral sentiments. A noteworthy 27 per cent expressed a positive view of NHS Dentistry.
Private dentistry, in particular, evoked vibrant positivity. Numerous operators highlighted expanding revenue streams, further exemplified by impressive growth rates, which ranged from 8 per cent to 13 per cent over the prior year. There was a unanimous sigh of relief as the post-lockdown appointment backlog has been effectively addressed, restoring operations to a more routine cadence. Furthermore, the industry feels empowered with the eased process of recruiting and retaining Associates, reinforcing an optimistic perspective on the future availability of qualified dental professionals.
THE FINANCE LANDSCAPE
In the first half of 2023, Christie Finance observed a surge in borrowing demand, heralded by both newcomers and veteran operators in the dental sector. Their investment decisions, steeped in long-term foresight, strategically factored in the evolving dynamics of borrowing costs. This burgeoning interest underscores not only the dental sector’s vitality but also the sustained trust and confidence vested by banking institutions and lenders keen on perpetuating their robust support to the sector.
Digging deeper into the numbers, Christie Finance highlighted that the average dental practice transaction during H1 2023 stood at £1,012,222. This translated to an average loan quantum of £981,611, facilitated at a competitive interest rate of 2.39 per cent.
Christie & Co’s latest report also includes a conversation with the esteemed Raj Rattan MBE and showcases a spotlight on its accomplishments in practice sales, culminating in a detailed case study highlighting its pivotal role in the landmark deal between Queensway Group and Dentex.
Paul Graham, Head of Dental at Christie & Co, comments, “Today, we present the culmination of our comprehensive research and expertise in our Dental Market Review 2023. This is not just a report; it’s a lens into the future of the UK dental business sector. Drawing insights from key stakeholders, we’ve delved deep into the intricate dynamics shaping the sector’s landscape.
“Our findings underscore a robust, positive trajectory for the dental sector. The resilience and agility demonstrated by industry leaders, even in the face of challenges, is truly commendable.
“We believe that the insights provided will pave the way for informed decision-making and strategic foresight.
“Our collaboration with the esteemed Raj Rattan MBE and our extensive involvement in monumental transactions, like the Queensway Group/Dentex deal, further solidifies our commitment to being at the forefront of the dental sector’s evolution.”
To read the full Dental Market Review 2023 report, visit: https://www.christie.com/dental-market-review-2023/
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