There has been a sizeable increase in the average goodwill values of those practices sold and an even more substantial rise in practice valuations, according to the latest data.

Results from NASDAL's (National Association of Specialist Dental Accountants and Lawyers) Goodwill Survey statistics show almost all of the growth is in the average goodwill values of NHS practices as they continue their recovery after a difficult year or so. The period to the 31 July 2019 saw an average goodwill value of 194% of gross fees - a big increase up from 149% in the quarter ending 30th April and up from 118% in the quarter ending 31 January 2019.

This quarter saw big rises in valuations as well - up to 151% of turnover of average goodwill values from 131% in the previous quarter. This seems to be being driven again by NHS practices - with an average goodwill value of 162% - up from 131% in the previous quarter. However, valuations on mixed practices are also up to 180% from 155% in the quarter ending 30 April 2019. It must be pointed out that valuations can traditionally be more volatile than actual deals done and these have proved to be a more reliable statistic in the past.

figure 1

Goodwill as a percentage of fee income

Alan Suggett, specialist dental accountant and partner in UNW LLP who compiles the Goodwill Survey, said: 'It never fails to amaze me that such a high value is placed upon NHS practices - particularly in such challenging and uncertain times. Brexit is possibly only a fortnight away. When it finally arrives, the new much heralded reformed contract could obviously have massive implications for goodwill values. Be that as it may, investors still seem to be happy to pay a premium for what they consider a 'safe' investment.'

NASDAL reminds all that as with any averages, these statistics should be treated as a guideline only.