From the recent ezine from Alan Suggett & the team at UNW
LATEST NASDAL GOODWILL SURVEY RESULTS RELEASED
NHS dental practices continue to attract higher prices than private practices according to the latest goodwill survey results from NASDAL.
Carried out quarterly, the most recent survey for the period April to July 2013 shows that on average, an NHS practice – defined as a practice with more than 80% of its income from its NHS contract – had an average goodwill value expressed as a percentage of gross fee income of 105.2%.
Since the two previous surveys showed that NHS practices usually command considerably more than 100 per cent of turnover and private practices around or below 100 per cent, a trend is established for 2013.
When the figures for valuations (i.e. as reported by professional valuers) are compared to the figures for deals (i.e. actual sales or purchases of practices), it indicates that NHS practices can fetch more than expected, and private practices go for less than expected. Meanwhile, mixed practices are more predictable. The valuation average for mixed practices was 100% in the quarter ending July 2013 and the deals show an average price of around 95%.
Alan Suggett, a specialist dental accountant of UNW LLP commented: “My thoughts about the survey are that it continues to show that NHS practices are highly sought after – with smaller ones being sold with goodwill valued on a percentage of fee income basis (usually around 100%), and larger ones on an EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) basis, which can yield much more.”
A key aspect in the differentiation is that large NHS and mixed practices are of interest to corporate buyers which are competing with each other.
The figures can’t be taken in isolation, Alan stressed, since large corporate purchasers usually insert performance criteria into their buying price. So, whilst they may be ready to pay above “market rate” for a practice, but if in the years following the sale the practice doesn’t perform in line with pre set expectations, then the sale price is reduced. He added: “We are therefore measuring a maxi- mum sale figure which, in the course of time, could be reduced.”