Are we heading towards a crash in dental practice goodwill values?

Chris Barrow warns that dental practice values may be heading for a crash as speculative buying begins to outpace real business performance.

In every market cycle, there comes a point when a sensible trend starts to attract an irrational narrative.

In UK dentistry, the rapid rise of small dental groups is not, in itself, a problem. Consolidation can bring better systems, deeper management, improved buying power and clearer career paths. 

But when expansion is driven less by patient care and operating discipline, and more by the promise of a quick re-rating on exit, it is reasonable to ask a difficult question: who, exactly, is the end buyer?

Lessons from the South Sea Bubble

That question matters because parts of the market are beginning to sound uncomfortably like a modern version of the South Sea Bubble. For those who need a refresher, the South Sea Bubble was the great British speculative mania of 1720. 

Investors piled into the South Sea Company on the strength of an exciting story and the assumption that the price would keep rising because someone else would always pay more. 

When confidence evaporated, valuations collapsed, and many were left holding paper wealth that could not be realised.

I am not predicting disaster, and I am certainly not arguing that all dental groups are fragile. Some are being built on real infrastructure, long-term capital, operational excellence and a genuine commitment to clinical culture. The strongest groups are built to own well, not merely to sell well. Those businesses may prove highly resilient. 

The concern lies elsewhere: in the growing belief that assembling a collection of practices is, by itself, a route to a higher Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) multiple and a lucrative flip within a few years. 

Scale can create value. Scale without integration, governance, leadership depth and cash discipline can simply magnify risk.

The roll-equity trap

This is where the familiar ‘we’ll all get rich with shares in Topco’ story deserves especially careful scrutiny. 

The promise can sound seductive: sell now, roll equity, wait patiently, and become significantly wealthier when the parent company sells on. 

Occasionally, that may happen. But paper shares are not the same as realised value, and hope is not the same as strategy.

If too many small groups are built on the same assumption – that institutional money will always be available and that the next buyer will pay an even higher multiple – then goodwill values risk drifting away from the fundamentals that ought to support them.

Focusing on fundamentals 

Those fundamentals are not mysterious.

Sustainable EBITDA matters. So do recurring patient demand, clinician retention, strong middle management, clean data, robust compliance, sensible debt, and a business that does not depend on one heroic principal. 

In other words, the practices and groups most likely to command premium valuations in the long term will be the ones that could still prosper if no sale ever happened.

That is a far healthier test of value than any pitch deck promising riches at the next turn of the wheel.

My plea is not for pessimism, but for sobriety. Dentistry remains an essential service and a fundamentally attractive sector. Yet attractive sectors are not immune to over-exuberance. 

When narratives become too easy, when everyone claims they will sell up to someone larger, and when ‘future multiple’ starts to matter more than present performance, wise owners should pause.

In business, as in markets, the most dangerous words are often: ‘Don’t worry, there will always be another buyer.’

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