Are Dental Clinics a “Declining Industry”? The “Real Reasons” Behind Record

News Highlights

According to Toyo Keizai Online, the number of bankruptcies and closures of dental clinics is increasing at a record pace. This is not simply a “declining industry,” but rather a manifestation of underlying management challenges. The importance of early consultation with experts, negotiation for the release of personal guarantees, and business succession with consideration for regional healthcare are key discussion points.

M&A Medical Editorial Department’s Perspective

The Toyo Keizai Online article reporting a record pace of dental clinic bankruptcies and closures indicates a severe business environment for those involved in regional healthcare. In particular, the observation that a worsening current ratio and consecutive years of operating losses are signs for “early consultation” is something we experience daily in the M&A brokerage field. If M&A can be considered while the business is still healthy, there is room for negotiation, such as releasing the clinic director’s personal guarantees. This can be a crucial step to avoid the worst-case scenario of closure and to transfer patient base and staff employment to the next operator. For example, if dental clinic A (hypothetical), which has no successor, had personal guarantees from the director for loans taken since its opening, by establishing an M&A strategy early on, the possibility of negotiating the release of guarantees with the successor increases, thereby reducing the director’s debt risk. From the perspective of maintaining regional healthcare, rather than dismissing it as a mere “declining industry,” it is time to actively consider business succession as an option.

Discussion Points Indicated by This News

• The fact that dental clinic bankruptcies and closures are at a record pace suggests structural issues within the industry as a whole.
• A worsening current ratio and consecutive years of operating losses are concrete management indicators that prompt early M&A consultations.
• M&A conducted in a healthy state is key to favorably advancing negotiations for the release of the clinic director’s personal guarantees.
• By choosing succession over closure, it is possible to contribute to maintaining the patient base and staff employment within the region.

Practical Questions Arising from This News

• Specifically, what management indicators, when they worsen, can be considered a timing to explore M&A?
• To what extent is the release of personal guarantees achievable in M&A negotiations, and what are the keys to success?
• In cases of no successor, what types of business succession schemes can be considered as alternatives to closure?

If You Feel “Should I Consult Too?”

Dental clinic management facing the word “declining industry” with anxiety, or confronting specific management challenges such as a worsening current ratio or declining operating profit margins, may find it worthwhile to consider consulting with an expert. Early consultation can broaden the options for business succession through M&A, such as creating room for negotiation to release personal guarantees, thereby increasing the possibility of succession under more favorable terms and contributing to the maintenance of regional healthcare.

M&A Medical (CentralMedience Inc.) supports the business succession of medical corporations, hospitals, and clinics on a full success fee basis as a certified M&A support institution by the Small and Medium Enterprise Agency. Consultations are handled with strict confidentiality. Free consultation here