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MediEstates - Price Boom
Price Boom


PRACTICE ONE
Practice Location -
boasting four surgeries, this practice is strategically located in the heart of the community and is close to both primary and senior schools, the main shopping area and public transport facilities. The immediate surrounding areas are heavily populated with a mix of housing types, including housing association accommodation and privately owned properties. The area is regarded as ‘up and coming’ with ongoing regeneration and improved commuter links directly to Manchester. The airport is approximately a 30 minutes drive, thus making this acquisition opportunity of increased appeal to a growing number of relocating dentists for whom ease of access to an international airport is of particular importance.

Practice type - established for over 70 years in this location, the practice delivers dental treatments to a patient base of approximately 8,000. Most are registered as NHS patients although the practice currently only accepts 20-30 new patients per month on a private or monthly plan basis. The leasehold premises are spacious and the surgeries perfectly functioning, although slightly dated. Some strategic capital expenditure would enhance the presentation to further attract private clientele, consequentially filling available chair capacity and facilitating future growth.

The principal and two full-time associates share the workload relatively equally, with each performing 6,000 to 7,000 units of dental activity (UDAs) per annum and generating a similar amount of private income per annum. All three dentists have a long-standing presence in the practice and have built a loyal patient base and a friendly, stable support team during that time. Currently, the principal’s wife carries out practice management duties, although it is her intention to retire with her husband upon completion of a sale. This enables an incoming buyer to replicate the current arrangement or to recruit a suitable replacement of their own choice at a salary reflective of ability and experience.

Agent’s comments - with the sale being due to imminent retirement, the principal’s key requirement was the ability for both he and his wife to leave immediately upon sale without the need for any clinical ‘tie-in’ period. Due to the level and the nature of the income streams into the practice, it is considered that a change of ownership would not significantly affect the turnover adversely, thus the risk of loss of goodwill is deemed relatively low. All work performed by the principal could be assumed by an incoming owner-occupier (or associate) without specialist skills, although enhanced clinical skills would potentially add another income stream to the business.

The flexibility of a workable business model, together with the stability of income from the NHS contract, attracted intense interest from all buying sectors, including dental corporates, with numerous excellent offers being negotiated. The principal had a personal desire, however, to see his business legacy continue with an independent successor (like himself) and subsequently chose a suitably matched buyer who demonstrated being the best ‘ethical fit’ for the continuing care of his patients.

Financials - the performance of the NHS contract delivers the majority of the £652k turnover, with approximately £165k generated from private fee-per-item treatments and the monthly plan registrations. Staffing costs are currently high due to the salary paid to the principal’s wife, however this will cease upon sale and the total annual wage bill forecast is approximately £95.5k including employers’ national insurance (ENI). Laboratory costs and materials were as expected for a practice of this size and type (at approximately 12% of turnover) and reflect the nonspecialist nature of treatments currently. With the lease at £27.5k per annum, this is a relatively low cost for the space offered and income generating capability. Adjusted net profit margin calculates to approximately 26% and will be further enhanced by a dynamic incoming buyer minimising external referrals and realising growth potential.

Price achieved - £975,000 including goodwill, equipment, fixtures and fittings.

PRACTICE TWO
Practice location -
located in a historic market town within a three-storey Georgian building, providing spacious business premises on a lease costing just £20,000 per annum, this seven-surgery practice is ideally situated on the edge of the town’s main shopping area and car parking facilities. Although the full repairing lease is now approaching the end of its original 15-year term, the landlord has confirmed that a new lease on the same commercial terms will be offered to a suitable incoming buyer, subject to references. The area demographics are diverse, and the practice has been serving patients from the town and surrounding villages for over 25 years. It is understood that approximately 60% of the patient base is ‘exempt’ and that a significant percentage of the remainder earn only ‘minimum wage’ levels, thus ensuring consistent demand for the NHS dental services offered by this practice.

Practice type - under the current ownership of two partners, this large NHS practice houses seven well-equipped surgeries, which are used almost to capacity for the delivery of the £1.3m GDS contract. The decorative presentation is in good order, having recently undergone refurbishment, and there is a planned schedule of renewals for each surgery to mitigate the risk of untimely breakdowns, which would seriously impact on performance and delivery of service. Nine dentists work varying hours to perform the targeted UDAs, with associates being remunerated at £12 per UDA. This is notably higher than typical rates nationally, however is reflective of the ‘supply and demand’ recruitment situation in this geographical location. Income from private treatments is comparatively low, with approximately 12% of the total turnover being generated from this source, and this demonstrates further potential to increase the turnover. All of the clinicians, including the partners, are willing to stay on in a post-sale situation, thus continuing the stability of care for patients and assisting with a seamless transition for the new owner.

Agent’s comments - this is a typical, large practice that is organised for, and committed to, the successful delivery of the NHS contract, this being the significant income generator for the business. It is noted that the opening hours of the practice do not particularly facilitate ease of access for residents/patients working outside of the town and further afield, and it would be worthy of consideration to extend sessions accordingly, which would create further chair capacity and consequential income potential. Although specialist treatments are not offered inhouse currently, other competing clinicians in the area incorporate these provisions successfully into their own business models. With the demographics of the town changing rapidly and a more cosmopolitan vibe evolving, this could realistically be an area of future growth for the business.

Financials - the generous contracted UDA rate of £29+ supports the higher than average associates’ remuneration, whilst still delivering very good levels of profitability – contributed to, in part, by the other low operational costs of the business and premises. Staffing costs are well controlled, with nursing provision closely mirroring clinical time and hourly rates in accordance with local employment parameters. Laboratory and material costs are slightly higher than expected for the predominantly NHS treatments carried out, however there is scope to reduce these to a realistic lower level with carefully managed stock control and price negotiations with suppliers. With turnover averaging £1.43m over the last three years evidenced, and the partners generating approximately 30% of the total gross, net profits are good. The forecasted adjusted net profit for an associate-run business model (retaining all clinicians on current pay rates) is approximately £479k, representing 32.3% of turnover, with enhanced profits possible for an owner-occupier who assumes a clinician’s role.

Price achieved - £2,755,000 including goodwill, equipment, fixtures and fittings.
Posted by: Anne Barker on 12 Oct 2015

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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