Dental practice valuations have taken a sharp drop in the last quarter, dropping to 128% of fee income.

That’s according to the latest quarterly goodwill survey from NASDAL, which shows valuations have dropped by 12%.

Despite this, the value for deals completed is slightly up, with an average goodwill value of 136% of gross fees.

‘The valuations attributed by certain valuers have been in excess of what the market has been prepared to bear, primarily dictated by what the financial institutions are prepared to fund,’ Cliff Fleming, partner at Condie & Co Chartered Accountants based in Fife, said.

‘As a result of this, during 2018 valuations have moved closer to deal prices rather than the other way around.

‘This has helped to alleviate difficult discussions between buyers/sellers when buyers have to educate sellers as to what their practice is actually worth in the market place!’

Wide range

The range of practice valuations now stands at 266% of gross fees, the figures show.

NHS practices are in huge demand with a number of sales in the quarter at over 200% of gross fees.

‘I think that a range of more than 250% illustrates how divided dental practice sales are in the UK,’ Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the goodwill survey, said.

‘When I started in dental accounting, if someone had suggested a goodwill value of 313%, they’d have been laughed at!

‘But, if your practice “ticks the right boxes” then it seems the market will pay what you want.

‘However, if it doesn’t, you may have trouble selling it at all.’