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The State of the Dental Economy – Industry Reset for Younger 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
Florida never seems to be lacking in qualified buyers for most areas of the state. Qualified buyers  are individuals who have some actual practice experience that may include GPR or other residency programs or associateships. However, the primary qualification continues to be a good credit history and score.

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 still  financing 100% of the loans, with additional working capital available. Although student loan debt  is still an important factor, banks are comfortable with the increasing amount of debt many younger  dentists have.

Practice Availability and Value
In contrast to there being many qualified buyers, there is currently a lack of quality practices on  the market. Those considering a purchase in the near future should contact our transition specialists to discuss the parameters of the practice they are interested in, so that when a practice becomes available, a potential match can be made. Also, practice opportunities in  non-urban or more rural areas may merit strong consideration. An opportunity still must show good  cash flow for it to make sense, but in the cases where the practice does, practice values are  staying strong.

Confidentiality / Non-Disclosure and “Client” Relationships
We are planning a more in-depth article about this topic, but as a short primer, we are still  seeing potentially deceptive agreements covering confidentiality/non-disclosure from brokers in the industry. These agreements attempt to bind the purchaser to the particular broker and establish a relationship that isn’t necessary and may be potentially damaging to a transition. Please read these agreements carefully and be wary of clauses that attempt to reach beyond what is necessary to simply maintain confidentiality.

 

Bank of America Capital Market Outlook

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