Wars and rumours of wars
It has been interesting, over the last couple of weeks, to hear from various reliable sources stories of disillusioned clinicians, redundant head office personnel, expendable regional managers and fearful staff in a number of the larger dental organisations. There is a lot of re-positioning going on out there in the corporate sector – and this is taking place (perhaps counter-intuitively) at the same time as many independent practice owners “in the Autumn of their careers” (and fed up with compliance and recession) are deciding to pack up shop and sell. My take on this is to yell “caveat emptor” at any principal who is in a sale negotiation – and ask how strong financially is the purchasing body? It’s all well and good for a corporate to do “due diligence” on an independent – what about the other way around? I still believe that practice values quoted in the media are too high – and I have no “hidden agenda” for saying that – just sound economic sense. Recently, I was asked to help value an existing practice with over £600k of NHS contract and a further £200k of private sales. The agents would have salivated and started the conversation at £750k plus property. Some corporates would quite possibly offer that price. Certainly 100% for the NHS element and a good earn out for the private. Or perhaps that would be paid by yet another one of those gullible younger dentists who seem to be lawful prey at the moment for both valuers and principals who want to become associates in their own practice. I sat down with an experienced management accountant, worked out the EBITDA and concluded that a realistic valuation based on sound economic principles would be £380k – and not all of that up front. The disparity between the prices that are being paid for practices and what they are worth is alarming – and it may account for the fact that many of the larger dental businesses out there are shedding staff left right and centre at the moment. The model isn’t working. So be very careful who you sell to.