Recently we conducted an analysis of the available and viewable open market listings for dental practices in Canada. Here’s what we found.
The current dental practice marketplace shows a bimodal market. The smaller peak is “the unicorns” and the larger peak is the harder-to-sell practices.
There are those practices that receive one or more letters of intent in within 30-120 days of being listed.
And there are those that sit on the shelf. These practices are taking more than 4 months to receive an offer, many of which take 12-18 months.
The first group gets chased by the market. The second group chases the market, with price reductions, broker hopping, and in some cases, the owner having to work longer with an eventual chart sale as their exit.
This spread between the two peaks is becoming more pronounced.
This is attributable to a few different considerations. One is reduced risk tolerance from buyers, consolidators, and lenders that affects value considerations immensely. Another is because the saturation of dentists in Canada and staffing challenges require more convincing for a buyer to leave a highly productive associate position to leap into the role of ownership. The benefits of this leap need to outweigh the risks. And as dentists, we are a risk averse group.
For the practices that take many months or even years to find their match, it seems the greatest influencers are one or more of the following:
- low cash flow/EBITDA
- unrealistic valuation expectations
- poor lease structure
- over dependence on owner production
- weak or declining hygiene program
- poor physical premises
- difficult geography
- transition risk that demonstrates potential of goodwill loss
We are hosting an in-person workshop on June 12th in Hamilton, Ontario to tackle these challenges with Kevin Fernandes at KMB Law.
If you’re 3-10 years away from your intended exit, please come to our workshop. Email us at info@practiceadvocate.ca to secure your spot.
One in 6 practices we appraise is a unicorn. Let’s make sure your practice is one of them.
