What to expect in 2025
With a new year upon us, Martyn Bradshaw, Director of PFM Dental, discusses whether 2025 should be the year to sell your dental practice
What has the market been like in Scotland over the last few years?
There is no doubt that the dental sales market over the last few years has had to weather some storms; COVID-19, an increase in bank rates (from 0.1 per cent to 5.25 per cent although this has more recently reduced to 4.75 per cent) and the struggles with associate recruitment.
However, what we have seen over this time is the robustness of the market. While some corporate groups had stopped purchasing for periods of times others continued. Owner occupiers continued to purchase, helped by the banks continued support for dental practice purchases, irrespective of the increased borrowing costs.
We did see a small reduction in the multiples being used when calculating the values of the practices. However, when you consider that the EBITDA (earnings before interest, tax, depreciation and amortisation) calculations that we use remove the loan repayments, it is easy to see why such multiples could previously be achieved, when the Bank of England base rate was at 0.1 per cent and some loans were totalling less than 3 per cent, as the affordability was easier. However, we are only talking a small reduction from the height of the market.
What do you expect from 2025?
The growth in the market was actually seen in the last half of the 2024 year and I believe that we will continue to see the same growth. We have already had a number of discussions with corporates this year who have huge spending plans and are now looking for the right practices to fit into their structure.
Private buyers’ interest remains high, likely because of them seeing that the Bank of England base rate stabilised from mid-2023 then reduced in 2024. We actually saw a higher proportion of dental practice sales to private individuals last year in comparison with previous years.
Will ‘Business Asset Disposal Relief’ changes affect the market?
In the 2024 autumn budget, the new rate of tax applied to Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief – applicable to gains of up to £1.0m when you sell a business) is increasing from 10 per cent to 14 per cent in April 2025 and then rising to 18 per cent in April 2026. Capital Gains Tax (above the £1.0m of gain) is now charged at a rate of 24 per cent, which is a 4 per cent increase from previous rates.
For any vendor who is looking to sell their dental practice in the next 12 months, it is likely that they will want to be conscious of these increases and ensure that the sale is completed prior to the further increase in April 2026 so that they do not pay the extra tax. I don’t however believe that people will bring their retirements significantly forward because of this.
What about the timing for someone looking to sell?
The legal process in Scotland has always been reasonably quick, with typical timescales being around six months. Then build in time for finding a suitable buyer for the practice; I would urge anyone looking to complete before April 2026 (i.e. the increase to 18 per cent for Business Asset Disposal Relief) to start the process now so that there is sufficient time to get everything through in time.
Author
Martyn Bradshaw is a Director of PFM Dental and undertakes hundreds of valuations each year. His days are spent valuing and dealing with the sales of dental practices. PFM Dental is one of the leading dental sales agencies in Scotland.
pfmdental.co.uk
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