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The Next Five Years for Practice Transitions

Today, practice values remain very strong in a majority of the state, eclipsing market “highs” of the last few years as net incomes are increasing (thanks to overhead controls implemented during leaner times). In addition, in many locations, there are simply more buyers than sellers, and sometimes by a lot. But will this price trend begin to reverse itself and when?

It is no secret that dental practitioners are working longer, evidenced by the ADA’s Health Policy Institute, citing that the average dentist retirement age increased from 65.3 in 2004 to 68.7 in 2014. Many of these doctors who continued to practice are now considering placing their practices on the market for sale.

In some cases, we’re seeing some of the strongest practices we’ve ever seen. These practitioners spent the recessionary times strengthening their practices to run better and more profitable. While these practices may or may not be the most up-to-date when it comes to technology (i.e. may or may not have digital x-ray and are likely not paperless), the business itself is very strong. As you’d imagine these are highly desirable opportunities.

In some other cases, though, we have observed that doctors have reduced their clinical schedules over the last several years and may now own a business that has been showing a steady decline. These doctors have likely not invested in updating equipment or technology and therefore finding a purchaser may be harder (and therefore, pricing lower). The best solution for these owners may be to sell their patient list to a nearby doctor. Consequently, we are seeing an increase in the number of mergers, especially through the purchase of patient lists. We still find a merger to be the most valuable practice purchase (and one with the most flexibility in potential offer price).

Due to the high increase in student loan debt among many recent grads, we have also seen a dramatic increase in the number of dentists who are categorized as employees. For this group, practice ownership may never be a part of their future, lessening the number of active purchasers in the market.

Over the next five years, we will continue to see increased attempts at consolidation by major corporations. It is further conceivable that practice values may begin to decline as more Baby Boomers decide to retire (so supply outweighs demand). We are seeing this in rural areas now where pricing is lower for a similar quality practice to a suburban one – rural Florida is where true “value” is, along with some of the best opportunities! Our feeling, though, for the foreseeable future, it will continue to be that if a Seller is in the right location with a strong, updated, well run practice, they will more than likely receive a premium for their practice.

Questions about your practice, a practice you’re looking at, a merger or do you need a valuation? We have representatives well versed about each area of the state.

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