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The State of the Dental Economy – Industry Reset for Experienced Dentists

Just as large corporations provide quarterly updates to their stockholders and the general public, we at ADS Florida would like to give you, our doctor clients, a periodic update to keep you informed of the state of  the “dental economy” as it relates to practice transitions and the buyer marketplace.

General Dental Economy
The First Quarter of 2012 continued to show improvement in the dental industry as the economy recovers. Though still fragile and somewhat dependent on international economic conditions, indications are that slow growth and improved stability will continue. The stock market has recovered largely from the losses incurred during the recession. Though still somewhat volatile, it  seems to have stabilized, with Q1 earnings showing slow growth.1 Though many dentists lost significant portions of their retirement portfolios, some, if not all, of those losses should have been recovered.

Buyer Availability
Fortunately, in Florida, we seem to be never lacking in qualified  buyers  for most areas of the state.  Qualified buyers are  individuals that have some actual practice experience which may include GPR or other residency programs or associateships.  The primary qualification however continues to be a good credit history and score.  We are regularly contacted by qualified buyers looking for good practice opportunities.

Bank Financing
Currently, there is an abundance of  financing available from multiple banking sources at very competitive rates, ranging from in the mid 5% to the mid 6% for qualified buyers.  Lenders are  routinely  financing 100% of the loans with additional working capital available, and only in isolated situations are banks requiring some owner financing.

Capital Gains Tax Status

For those dentists contemplating a transition in the near future, serious consideration should be given to completing the practice sale before the end of 2012.   With as much as 90% of the sale price  allocated to goodwill, and because goodwill is treated as a long-term capital gain (currently taxed at 15%), it is important to note that this tax rate may only be available through the end of this year as it automatically reverts back to the previous 28% if Congress does not act to again extend the current tax rates.  A practice selling for $500,000 can expect to pay $50,000 to $60,000 in additional taxes if the current capital gains tax extension expires.

We understand this information may lead to more questions.    Rest assured that at ADS Florida, we  understand the market and are available to help answer questions and guide and assist you in the right transition strategy, at the right time.  Please contact any of our transitions specialists and we will be happy to work with you  in assessing your transition status.

 

Bank of America Capital Market Outlook

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