Dental mergers and acquisitions are on the rise. A post-COVID resurgence, organic growth in the dental sector, and a rise in private care have all led to increased demand; this, coupled with a growing ageing population, means that M&As are an attractive way to grow businesses and meet demands.
M&As offer a better economy of scale, which, in turn, can improve clinical outcomes and the patient experience as a whole.
But mergers and acquisitions are carefully regulated, and dental practices must meet specific professional constraints. Before entering into an M&A, it’s important to understand the factors that are considered before a transaction is approved.
Here’s what you need to know about how dental and healthcare mergers and acquisitions are regulated in the United Kingdom.
Regulatory Framework for Dental and Healthcare M&As
The Competition and Markets Authority scrutinise all dental mergers and acquisitions, and M&A transactions must not breach the Competition Act 1998 or the Enterprise Act 2002.
Competition and Markets Authority (CMA)
Competition is helpful in all markets as it drives down prices, raises standards, offers variety, and encourages innovation. Having choices is healthy in dentistry as it allows patients the chance to find a practice that meets their own needs.
The competition and Markets Authority (CMA) is a non-ministerial government department that regulates to strengthen competition in business and, as such, is responsible for ensuring M&As do not substantially reduce competition in the market.
Launched in 2013, the department combines the roles of the now-defunct Competition Commission and The Office of Fair Trading. The organisation investigates phase one and two mergers and potential breaches of the Competition Act 1998 and regulates public sector subsidies, amongst other responsibilities.
Competition Act 1998
The Competition Act 1998 bans price fixing between competitors. By agreeing to raise prices together, two or more competitors can artificially inflate the price consumers pay for goods or services.
Enterprise Act 2002
The Enterprise Act of 2002 changed insolvency and competition law, specifically prohibiting cartels. Colluding to limit competition could land business owners custodial sentences of up to five years.
The changes to insolvency bankruptcy were implemented to encourage a rescue culture that sought to save failing businesses.
The Impact of Regulation On Buyers
For buyers, the regulatory framework for M&As in the dental and healthcare sectors can present challenges; however, at Pluto Partners, we can expertly guide you through the process.
If you already own a dental practice, you may need to divest assets or impose conditions to comply with regulations.
The Impact of Regulation On Sellers
For sellers, the regulatory framework can provide greater certainty and stability, providing a level of protection for sellers, as they help to ensure that the terms of the M&A are fair and transparent.
Understanding the Regulations Surrounding Dental Business Structure
Before 2006, dental practices were either run by a sole trader, in partnerships, or as an expense-sharing arrangement where several sole traders worked together, splitting the use of resources and overheads.
Since 2006, dental practices can be established as a dental body corporate (DBC). DBCs can be limited companies, unlimited companies, and limited liability partnerships. For each business structure, there are different tax benefits and risks.
A DBC doesn’t need to get General Dental Council (GDC) approval; however, it will need to meet the requirements of the Dentists Act 1984. These requirements are that the majority of the DBCs directors need to be either GDC-registered dentists or registered dental care professionals.
Of course, in any business, directors and shareholders aren’t always the same person. This means that it’s possible that non-dental professionals could own 100% of the company’s capital, provided they employ the required majority of GDC-registered professionals.
Let Us Navigate You
Finding your way through regulation may bring up challenges. At Pluto Partners, we’re very experienced in handling dental and healthcare M&As. Whether you’re buying or selling, our team can provide expert advice and a range of legal and compliance services to ensure your transaction meets regulatory requirements.
Get in touch today to learn more about how we can help you achieve your plans.