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MediEstates - Goodwill prices still strong
Goodwill prices still strong


MediEstates is in agreement with the comments made by Alan Suggett in the quarter ended 30 April 2015 NASDAL (National Association of Specialist Dental Accountants and Lawyers) report on practice goodwill values. The report illustrates how average goodwill values across all practice types are still strong; the value of private practices has increased by 9% since the last report.

Rising values
Our experience with NHS practice sales correlates with the report’s findings of ‘the value of NHS practices continues to outstrip mixed and private practices’, with the larger NHS practices completing for well over 170% regularly. We have recently completed on a predominantly NHS practice where the price achieved was substantially higher than the average practice values published, equating to 184%. With the largest number of registered dentists looking to buy a practice in the UK, along with our proactive marketing campaigns, we are still seeing the goodwill values continue to rise as demand outstrips supply.
PRACTICE ONE
Practice Location -
Located close to the centre of a major commuting town on the south coast, there are commuter links directly to the City of London and surrounding areas. The practice has been established since the 1920s and was acquired by the current owner in 2002. It benefits from shops, services and a high-end designer outlet within the immediate vicinity which results in some passing trade.

Type of practice – This is a four-surgery, fully private practice, which had a substantial freehold as part of the sale.

Buyer appetite – Of the 4,000+ buyers registered with Mediestates, 207 buyers expressed an interest in this practice and received the full information pack. This, along with the 1,828 web views, gained substantial buyer interest in the practice. From the marketing 12 different buyers had viewings arranged with the vendor. After these viewings, numerous offers for the practice were received, which ensured asking price was achieved.

Incoming purchaser/reason for sale – The vendor’s choice of buyer specifically came down to the many shared values they had with the incoming purchaser. This allowed an easy transition of the business to the new owner and a speedy process, with the sale transaction going from ‘offer received’ to ‘completion’ in just five months.

Financials – The practice generates annual fee income of £385,631, of which 31% is practice plan and the remainder fee per item, producing a profit margin of 38% (before adjustments). The co-principals (husband and wife) work three days each per week, along with an associate working two and half days per week. The staffing levels at the practice are as expected with a receptionist, three nurses and a practice manager, albeit the rates of pay are higher for the dental nurses than the average rate for the area.

Price achieved – £695,000 inclusive of freehold, goodwill, equipment, fixtures and fittings, which is in line with our valuation.
PRACTICE TWO
Practice Location -
The practice was established in 1979 and is located in a prominent position within a pedestrianised sector of the city centre, benefitting from nearby pay and display car parks as there are is no on-site parking.

Type of practice – This is a four-surgery, mainly NHS practice, which is being sold with 13 years left on a low lease.

Buyer appetite – Of the 4,000+ buyers registered with Mediestates, 421 buyers expressed an interest in this practice and received the full information pack. The levels of interest were substantially high, with buyers falling over themselves to view the practice. The vendor had 39 viewings over three weekends, such was the demand. After these viewings, numerous substantial offers for the practice were received which in effect, resulted in multiple bids by buyers for the practice, driving the sale price up.

Incoming purchaser/reason for sale – With the number of high offers coming in for the practice, the vendor had a multitude of choice of whom to sell to. He decided to sell to a dentist who owned another practice within 10 miles of this site, as he felt the buyer had a feel for the area, and would continue in his footsteps rather than make wholesale changes after his retirement. The whole process once the practice was in SSTC took eight months to complete, which fit well with the retiring dentist wanting to totally cease his clinical duties.

Financials – The practice generates annual fee income of £775,706, of which £747,706 is NHS. The NHS contract is GDS and is to fulfil 23,048 UDAs, giving an extremely high UDA rate of £32.44. The remaining private element is carried out by the outgoing principal. The UDAs are fulfilled by the principal who does two days per week and three associates who all work five days per week. Staffing costs are slightly higher than normal due to pay rates as nurse staffing levels at the practice closely mirror clinical time. The lease on this practice is low at £12,000 per annum and was re-assigned to the incoming buyer with 13 years left.

Price achieved – £1,472,479 for goodwill, equipment, fixtures and fittings, which is slightly higher than our valuation due to the interest in the practice.
PRACTICE THREE
Practice Location -
Originally established in 1959, this practice has been owned by the current principal for over 30 years. It resides amongst numerous commercial properties in a large residential area and benefits from free on-street parking.

Type of practice – This is a three-surgery, mixed practice, with a two-storey freehold (valued at £225,000) as part of the sale.

Buyer appetite – The specifics of this practice matched the buying specification of 279 buyers registered with Mediestates, whom all received full details of the practice. The web views through the Mediestates website on this practice reached 908 within two weeks of appearing online. Eighteen viewings were requested from buyers interested in the practice, which resulted in eight offers received, two of which were over the asking price.

Incoming purchaser/reason for sale – Emigration was the sole reason for the vendor selling the practice, with the incoming buyer going into practice ownership for the first time after nine years working as an associate. The timeframe for completion was tied in to suit the vendor to assist his emigration plans, and completed in eight months.

Financials – The NHS contract of £34,523 makes up 12% of the total practice income of £291,020, with the remainder fee per item. This income has increased by 5% compared to the previous year, yet the costs of the practice has remained the same as the previous year, thereby increasing profit levels to 34%. The practice generates this income over a 4.5-day week, with the current principal working all of these days, along with an associate working one day and two hygienists working part time. There are two nurses (both with the practice over six years), a trainee nurse and a receptionist employed at the practice.

Price achieved – £536,000 inclusive of freehold, goodwill, equipment, fixtures and fittings which is in line than our valuation.
Posted by: Anne Barker on 11 Apr 2016

General Buyer Terms 

This agreement is in relation to MediEstates Limited whose registered office is at 1st Floor, Pacific House, Stanier Way, Wyvern Business Park, Derby, DE21 6BF acting for and on behalf of our clients ("the Vendors"); and yourself (Buyer's Name) in relation for an introduction to a prospective sale of a business as a going concern. By registering through this agreement I agree to all terms set out below:

  1. Definitions
    In this Agreement the following terms and phrases shall have the following meaning unless the context otherwise requires:

    Business
    Dental Practice business providing dental care. This business is under the MediEstates Ltd sale terms.
    Confidential Information
    Means the actual Vendors identity and all confidential information in respect of the Business, including, but not limited to, any ideas, business methods, prices, accounts, finance, marketing, research, development, manpower plans, processes, market opportunities, intentions, design rights, product information, customer lists or details, employees’ details, trade secrets, computer systems and software, and other matters connected with the products or services manufactured, marketed, provided or obtained by the Vendor, and information concerning the Vendor’s relationships with actual or potential clients or customers and the needs and requirements of such clients’ or customers’ operations.
  2. Obligation of Confidentiality
    The Prospective Purchaser agrees to treat as confidential, information supplied by or on behalf of the Vendor in connection with the sale of the Business.
  3. Exclusions
    The obligation of confidentiality set out in clause 2 does not apply to:
    1. any information received from a third party who was legally free at the time of disclosure to disclose it;
    2. any information which was already lawfully in the Prospective Purchaser’s possession prior to receiving it from MediEstates Ltd on behalf of the Vendor; and
    3. any information which is in its entirety already in the public domain.
  4. Duties of Prospective Purchaser
    1. The Prospective Purchaser shall take such a reasonable security measures to protect the Confidential Information and trade secrets.
    2. The Prospective Purchaser shall not, without the prior written consent of the Vendor, permit any of the Confidential Information:
      1. to be disclosed, other than in confidence to its legal or professional advisors;
      2. to be copied or reproduced;
      3. to be commercially exploited in any way;
      4. to be used for any purpose other than in connection with the prospective purchase of the Business;
      5. MediEstates is registered under the Data Protection Act 1998. Upon Signing this agreement you agree to follow the legal obligations of this act to protect the details of the information supplied to you, with it no to be passed outside of the control of you the prospective purchaser.
    3. The Prospective Purchaser agrees to keep a record of Confidential Information received.
    4. The Prospective Purchaser will return to MediEstates or the Vendor all documents containing Confidential Information and all copies of those documents on demand at any time which are in its possession or under its control, and for this purpose the term “documents” includes computer discs and all other materials capable of storing data and information. The Prospective Purchaser agrees that such documents remain the property of the MediEstates on behalf of the Vendor.
    5. The Prospective Purchaser must not jeopardise or re-direct the sale under any circumstances.
    6. The Prospective Purchaser must not contact the Local Area Team or CCG regarding any practice sale, by any means of media unless written permission is granted from the Vendor.
    7. To carry out own due diligence on practice purchases and accepts that any information MediEstates has supplied is information provided by the vendor and is not responsible for its accuracy or completeness.
  5. This Agreement
    The existence of this Agreement and its terms are confidential and neither MediEstates nor the Purchaser may disclose anything about this Agreement or its subject matter or implementation to any person other than in confidence to their legal or professional advisers.
  6. Duties of Prospective Purchaser
    When buying Dental practices, finance is normally needed. Our organisation operated over more than one of the MediHoldings brand, by completing this from you agree that the information can be shared to our other organisations to avoid the need to register independently and provide the best possible service.

    MediEstates will refer you to the specialist dental lending team and MediFinancial who will contact the necessary banks, whom have preferential healthcare lending rates in some cases, to ascertain which funding is available to you.
    By signing this agreement you do not have to use any of the banks MediFinancial contact, it is just another service which we provide.
  7. Deposit for Dental Practice
    If you are interested in putting forward a formal offer in for a practice, once the offer is accepted there will be a deposit required to secure the practice sale which is dependant of the practice size. This deposit is held in a client account and will be returned to the buyer on completion of the practice sale. You the buyer, will be required to sign a deposit schedule which will cover the buyer and the seller in the event that the practice sale does not proceed.
  8. Changes to this Agreement
    Any changes made to this agreement must be authorised and signed by one of MediEstates Ltd Directors.
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