A speedy start for the Scottish dental market in 2021
2020 turned out to be a disruptive year for most commercial industries due to the outbreak of COVID-19. Positively, the dental sector proved its resilience by adjusting quickly to challenges created by the pandemic and as a result, practice sales continued to flourish, particularly towards the end of the year. Judging from the demand we have seen so far in the first quarter of 2021; this buoyant activity shows no signs of abating.
We are seeing an increasing number of buyers flock to the market, comprising a wider mix of corporates and independents who continue to dominate the purchaser landscape. 71% of viewers have been independent buyers, of which about a quarter were first-time buyers. The increase in activity is driving competition and underpinning the premium prices being achieved for practice sales. This is very positive for those in succession planning.
The geographical preference for many buyers is still within the Central Belt, and the West Coast in particular where demand continues to outstrip supply in these locations. However, we are also seeing an increased appetite for rural practices which suggests Associates are looking for greater security through practice ownership.
Encouragingly, banks are keen to continue lending to the dental sector, with many now adapting their policies to allow for greater flexibility and options for potential buyers.
2021: Outlook for the Scottish dental market
So far in 2021, we have arranged a strong level of viewings – a mix of virtual, and face to face where the former is not possible – on a variety of practices and significant interest is being. Deals are completing in record time, we’re currently working with a three to six month time scale from offer accepted to completion.
A recent example is the sale of Fairmilehead Dental Practice & Implant Centre in Edinburgh. After a confidential marketing process, we achieved 10 viewings / interested parties within 10 days of going to the market, which converted into six offers; one of which the vendor was happy to accept. The deal took just eight working weeks to reach completion; a record timescale which perfectly reflects the huge buyer appetite in the Scottish dental market at present, where supply continues to outstrip demand.
Another example was a three-surgery owner-operated NHS practice that generated significant levels of interest shortly after launch. We received 11 formal offers at a closing date, all of which where in excess of the asking price. In the end, the practice sold to an independent first-time buyer.
Spring Budget 2021
Notably for the dental sector, the much-anticipated changes to the Capital Gains Tax scheme recently announced in the Spring Budget caused an influx of enquiries from Principal owners wishing to sell their practices. However, as these changes have now been shelved until a later date, we anticipate a number of practices coming to the market later in the year, ahead of an Autumn Budget.
Another significant change from the Budget announcement that will need to be considered is the 2023 rise in corporation tax, from 19% to 25%, however, this will not come into effect for another two years which will allow time for exit planning for those sitting on the fence.
From 1 April 2021 until 31 March 2023, companies will be able to claim a 130% super-deduction capital allowance on qualifying plant and machinery investments, and a 50% first-year allowance for qualifying special rate assets. This will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.
If you’re interested in buying or selling a dental practice, or just want to hear more about the Scottish dental market, please get in touch: email@example.com