Specialist business property adviser, Christie & Co, recently launched its Dental Market Review 2024 report, which offers a panoramic view of the UK dental business sector. The review offers a comprehensive look at the current state of the dental industry, highlighting significant trends, emerging challenges, and new opportunities for dental practices across the UK; as well as the assessment of the current appetite of banks to lend within the sector, and an extensive sentiment survey of over 35,000 dental professionals. As the dental landscape continues to evolve, understanding these insights is crucial for practitioners looking to stay ahead of the curve. Here’s a breakdown of the key takeaways from this year’s review:
- Over £750M in Transactions Reflects Sector Growth: In 2023, the UK dental market saw a wave of activity, with 908 dental practices either sold or advised on, representing a total value of over £750 million. The large volume of transactions highlights both the demand and the willingness of corporate players to divest certain assets, paving the way for smaller groups and new buyers to enter the market and reshape its future.
- Independent Dental Market Sees a 150% Surge: The independent market experienced a strong comeback in the latter half of 2023, marked by a 150% increase in transactions. This resurgence was driven primarily by smaller independent groups, first-time buyers, and established proprietors who could adapt more flexibly to market challenges, such as staffing shortages. As a result, independent practices accounted for 69% of deals. This shift signifies a broader democratisation of the market, where smaller players can thrive, especially in an environment where hands-on clinical delivery has become a key differentiator.
- Corporate Interest Shifts to Private Practices: Corporate buyers have shifted focus from NHS-heavy practices to those with a strong private revenue stream. By H1 2024, offers for NHS-led practices had plummeted to just 8%, compared to 57% in 2023, with 92% of offers now targeting private or mixed models. This trend underscores the challenges in recruiting for NHS roles and a growing preference for practices with stable, higher-margin private revenues. For practices considering their long-term strategy, positioning themselves as a private or mixed model could attract more interest from potential buyers.
- Operational Costs on the Rise: Operational costs continue to be a major factor in practice management, with staff costs increasing from 15% pre-COVID to 18% in 2024. Similarly, heat and light expenses have seen a 66% rise. These rising costs are putting pressure on profit margins, leading a decrease in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) for many practices. For associate-led practices, the average EBITDA margin has dropped to 16% for 2023-24, compared to 20% pre-COVID. This emphasises the need for practices to find efficiencies in other areas to maintain profitability amidst rising expenses.
- A Promising Future: Optimism in 2024: Despite economic pressures, the sector remains resilient. According to a recent sentiment survey, 86% of dental funders have a positive outlook for 2024, with 94% of banks foreseeing increased lending in the dental sector. Interest is particularly high in digital dentistry, with 60% of respondents identifying it as a key area for growth. The optimism from banks and investors suggests a continued appetite for funding expansions and acquisitions, giving 2024-25 a potential growth for practices looking to scale.
- Private Practice Valuations on the Rise: Valuations for dental practices remain strong, with the average practice valued at £1.32 million in 2023, up from £1.18 million in 2022. This upward trend reflects the sector’s ability to remain resilient, even as broader economic conditions become more challenging. The increasing valuation of private practices highlights the demand from buyers who see long-term value in this segment, particularly as they look for opportunities that provide stable income and growth potential in a shifting market landscape.
Final Thoughts
The Dental Market Review 2024 provides valuable insights into the trends shaping the dental industry this year. It further highlights the resilience and evolution of the UK dental market, with independent practices emerging as key players and private models gaining traction. Practices looking to thrive in this evolving landscape, staying attuned to patient needs, embracing digital advancements, and maintaining a focus on preventive care will be key. As the industry continues to transform, those who adapt quickly and strategically will find themselves well-positioned for long-term success. For dental professionals, investors, and practice owners, understanding these shifts is crucial for making strategic decisions in the year ahead.
