Christie & Co dental team reports 2022 as strongest year on record

The business reported that its dental team had its strongest year of performance on record. It remains that demand from buyers outstrips current supply and, as such, the broker anticipates that this favourable ratio will remain.

Dental business completion volumes at Christie & Co rose by 23 per cent from 2021 to 2022, and a staggering 124 per cent from 2018 to 2022, illustrating the increasing demand for quality practices. In 2022, 150 offers were formally accepted, reflecting a 50 per cent increase on 2021, and the aggregate offer value received rose by 48 per cent to over £930 million. Bank valuation instructions also hit an all-time high, with a significant increase in instructions, which is anticipated to continue.   

Pricing was competitive last year, with deals completing well in excess of the asking price. Christie & Co reported a positive dental price index of +8.6 per cent in 2021, and this trend continued throughout 2022, with a positive price index movement of +2.2 per cent which is reflective of the core market activity and continued growth and demand within the private sector and is offset against a cooling within the NHS market. 

Sentiment Survey

The business property adviser anonymously surveyed dental professionals across the UK to gather their views on the year ahead. Almost half (48 per cent) said they felt positive going into 2023 while 26 per cent felt neutral and negative in equal measure. When asked about their sale and acquisition plans in the year ahead, 57 per cent of respondents said they are considering buying and/or selling in 2023.

The Funding Landscape

In a segment on funding in the sector, Christie Finance notes the sheer strength of private dentistry, to the extent that lenders are now putting much less emphasis on NHS/Private split. The exit of some specialist banks in 2022 allowed other healthcare lending specialists to step into the spotlight, and there is a healthy appetite for the sector as they are offering excellent terms for the right practice and owner if positioned correctly. It is important to note, however, that under the strain of the current economic market and an ongoing recruitment struggle in the sector, lenders are generally taking a more cautious approach, so are favouring more robust practices that can withstand a stressed interest rate.

Market Predictions

In the year ahead, Christie & Co expects:

• High demand for private practices will remain, as private dentistry continues to benefit from growing waiting lists for NHS appointments
• The market will become more quality-driven and practices which are future-proofed will continue to attract premium prices as demand exceeds supply for the best assets
• Practices with NHS contracts will be subject to more scrutiny by purchasers and lenders in respect of UDA delivery and practice economics. Demand will continue to be strong for those with higher UDA rates and a good track record of delivery
• Corporate operators and other dental groups will continue to seek specialist practices to drive internal referral income
• Any tightening of consumer spending is likely to affect cosmetic and aesthetic revenues more than general treatments
• Further reforms in NHS dentistry are crucial to combat the shift towards private and the loss of dentists in the NHS. There is likely to be a rise in practices either rebasing or handing back their NHS contracts as practices convert partly to private/plan
• Demand for platform opportunities from new investors will remain strong. Group opportunities where NHS income is the smaller revenue stream will remain in high demand, particularly those that are fully integrated with a functioning head office structure
• The continued shortage of Associates and DCPs will inflate wage costs, impacting profit margins and forcing some owners to review their future strategy
• Buyers will remain active and continue to acquire, but with a more microscopic approach to viability and performance of the opportunity
• High street banks will continue to lend in the sector. Funding is being stress tested at the highest rate seen in over a decade, so a deal that worked before the interest base rises will continue to be viable for robust practices with a financially secure buyer
• Global technology companies will use virtual reality, Artificial Intelligence (AI), and 3D printing to accelerate efficiencies in the sector, especially in cosmetic and private dentistry

Paul Graham, Head of Dental at Christie & Co, comments, “The UK economy has been struggling under the weight of high inflation and rising borrowing costs. Pair this with operational hurdles within the dental sector including reduced personnel and an NHS at breaking point, then it wouldn’t have been a surprise to see a subdued or static performance last year. However, our transactional activity in the dental sector has defied these challenges and we’ve just achieved our strongest ever year on record. There is no doubt that the sector is recalibrating, but it’s far from doom and gloom. At Christie & Co, we have the largest team of brokers, RICS valuers and advisory professionals in the dental sector, with market-leading data and business intelligence which allows us to be agile, proactive with market predictions and trends, and wise on how to overcome the headwinds.”

For the full report, visit: christie.com/business-outlook-2023

For further information on this press release, contact:
Phoebe Burrows, Corporate Communications Manager
P: 07540 063 598 or E: phoebe.burrows@christie.com