If you are a dental laboratory owner who has been receiving sudden interest from dental corporates and private equity-backed operators, or you are considering selling your dental laboratory and want to understand the reasons for this interest, then this post aims to provide a comprehensive summary of why your laboratory is highly desirable from the corporate perspective.
Dental laboratories offer a high level of profitability compared to dental practices. While practices generate significant revenue, they are typically supported by a large team consisting of a practice manager, dental nurses, receptionists, and treatment coordinators. In contrast, dental laboratories consist mostly of highly-skilled technicians, each contributing to the lab's turnover. This allows for a more efficient and profitable operation.
Dental corporates and private equity backed operators tend to work to a 3 to 5 year exit plan, their exit valuation similar to a standalone business is based on EBITDA. Dental laboratories are currently valued at relatively low EBITDA multiples of 3.5x-5.5x, compared to the 9x-11x EBITDA multiple that corporates typically expect to achieve when exiting. This provides an opportunity for dental corporates to generate impressive returns on investment, in some cases IRR can exceed 50%.
Dental corporates are well-equipped to grow the laboratory by leveraging their vast experience and resources. This may involve deploying significant capital to expand the existing lab infrastructure, including investing in cutting-edge technology like 3D printers. With highly-organised HR departments, they can also focus on hiring additional technicians to meet the growing demand. Furthermore, dental corporates typically have skilled marketing teams that can update the website as needed and enhance marketing and promotional efforts to establish a dominant online presence. In particular, they can boost their search engine optimisation (SEO) rankings on Google and other platforms to drive increased visibility and attract new business.
Building a network of high-quality dental laboratories allows dental corporates to leverage the unique techniques and specialisms of each lab to enhance best practices within the group. This collaboration results in higher quality products being produced more efficiently, benefitting both patients and the bottom line.
Dental corporates can use their size and relationships with suppliers to the dental market to secure advantageous agreements, resulting in cost savings for the laboratory. These savings can then be passed on to patients, providing a competitive advantage in the market.
With a shortage of dental technicians in the UK due to Brexit, the COVID pandemic, and a lack of educational institutions providing courses, securing the supply chain is essential for dental corporates. By controlling the supply chain, corporates can improve quality control and turnaround times, leading to a better patient experience.
If you are considering selling your dental laboratory and want to understand its potential valuation in the current market, Eclipse Corporate Finance is a leading expert in dental laboratory valuation and is pleased to offer this service complimentary. On the other hand, if you are preparing for retirement and require assistance navigating the sales process, Eclipse Corporate Finance can provide invaluable support and guidance to help you achieve maximum value and ensure a seamless transaction. Visit our dental sales page below for further details.