Nov 20, 2023

Interest Rates, Borrowing & Dental M&As

“When is the right time to sell my practice?” 

This is one of the questions practice owners most often ask me. 

“It’s always the right time to sell,” is my answer. “But some times are more right than others.” 

Right now is one of those times: Interest rates are high, but a pause in rises has prompted a spike in dental practice sales, with the outlook for owners selling to corporate groups looking particularly good.

In this article, I’ll take a look at how interest rates are impacting the dental M&A market and explore why this is an ideal moment to secure an excellent deal from a corporate buyer. 

Interest Rates Plateau

Recent ONS data indicates that the UK economy is tentatively pacing towards recovery, with a slight growth of 0.2% in August, rebounding from a previous contraction in July. 

This has set the stage for what many analysts consider a period of economic steadiness, with the Bank of England (BoE) holding interest rates at 5.25% in September. 

This pause in rate hikes, after a staggering 14 consecutive rises, is the BoE’s response to the initial signs of slowing inflation. 

For dental practice owners, the pause could be a golden opportunity to maximise practice value and capitalise on the strong appetite of corporate buyers. 

Capitalising on Today’s Market

The pause in interest rate rises allows for more attractive valuation multiples. That’s because buyers—especially corporates with deeper pockets—may be keen to invest now while rates remain steady. 

Doing so allows them to safeguard against the risks of future devaluation from economic downturns or shifts in the market after the 2024 election.

This climate is excellent for deal-making, allowing both sellers and buyers to find common ground on valuations that reflect both the current performance and the potential of the practices involved.

Interest Rates, Performance and Corporate Borrowing

You’d be tempted to think that today’s high rates could deter corporate buyers. However, high-performing groups can access lower interest rates and better lending terms. Therefore, many groups are currently prioritising aggressive acquisition strategies, as any slowdown in growth could affect future borrowing power.   

Corporate groups also have an arsenal of additional mitigating strategies at their disposal:

More Borrowing Options

Access to various financing options, including bonds, bank loans, or private equity, which can mitigate the cost of higher interest rates.

Favourable Rates

The ability to secure lower-rate loans—perhaps due to better credit ratings or the economy of borrowing at scale—can buffer the impact of a high-interest-rate environment.

Flexible Repayment Terms

Interest-only periods, end-of-term balloon payments and hedging strategies can all lock in lower interest rates and protect corporate buyers from future rate increases.

Leveraging Financial Performance

Banks and financial institutions often provide more favourable rates to lower-risk borrowers that demonstrate robust profitability, strong cash flow, and a solid track record of debt repayment.

What Does This Mean for Dental M&As? 

Personal circumstances and the individual merits of each practice will always dictate the right time to sell.

However, the economic signals are currently aligned to favour practice owners. 

With economic indicators pointing towards stabilising interest rates, now is an opportune moment to consider taking full advantage of the seller’s market and preparing your businesses for sale. 

Take Your Next Step With Pluto Partners

To ensure the best possible outcome from your sale, it’s essential to seek advice from financial advisors and industry experts who understand the nuances of the dental market. 

Pluto Partners’ insights can help you navigate the complexities of selling to corporate groups, including understanding the current lending environment, the impact of interest rates, and the due diligence process. 

We can also provide invaluable advice on how to position your practice to achieve maximum valuation, guide you through the intricacies of the selling process, and negotiate on your behalf.

Contact Us Today

The decisions you make now can secure the legacy of your brand and your post-sale financial legacy.

Take the next step and engage with Pluto Partners to move closer to a future-proof exit strategy that serves your personal, professional and financial goals.

Dr Gursh Bajwa
Ascent Dental Group

As co-owner of multiple practices and having been through the processes of selling a practice previously. Max’s approach was in another league. I’ve no hesitations in recommending him to a colleague.





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