Dental Practice Bankruptcies Hit 20

News Highlights

According to a report on May 7, 2024, the number of dental practice bankruptcies has reached a 20-year high. Since the COVID-19 pandemic, public support has been ending in the healthcare sector, leading to increasingly challenging business environments. Dental clinics, said to be “helpful to have, but more numerous than convenience stores,” are perceived to be oversupplied, with intensifying competition also contributing to the situation. This trend highlights the importance of early consultation for business succession and M&A in medical institutions, the potential for negotiating the release of personal guarantees, and the perspective of maintaining regional healthcare.

M&A Medical Editorial Department’s Perspective

The news of a record high in “dental-related” bankruptcies over the past 20 years signifies more than just an increase in numbers. It is believed that the financial failures of dental practices, which have been enduring hardship, are now becoming apparent following the end of public support during the COVID-19 pandemic. In particular, the sheer number of dental clinics, said to be more numerous than convenience stores, underscores the severity of the competitive landscape. In such circumstances, it is presumed that an increasing number of practice owners are beginning to consider M&A or business succession for the first time as they face the “end of support.” However, by the time anomalies appear in financial statements, such as a worsening current ratio or consecutive years of operating losses, the available negotiation options become significantly limited. Consulting with experts at a healthy stage and favorably advancing negotiations for conditions like the release of the principal’s personal guarantees is key to achieving a smooth succession while protecting the patient base and staff employment.

Points Highlighted by This News

• The proliferation of dental clinics and intensifying competition, combined with the end of support after the COVID-19 pandemic, are driving up bankruptcy rates.
• Once financial conditions deteriorate, M&A negotiation power and options are greatly restricted.
• The possibility for owners to be released from personal guarantees depends on M&A occurring while the business is still healthy.
• Choosing succession over closure is essential for maintaining regional healthcare and securing employment.

Practical Questions Arising from This News

• Is M&A possible for dental practices that have just had their support ended and whose financial situation has also worsened?
• What specific financial conditions are required to have personal guarantees released?
• If a successor cannot be found, what business succession schemes are available as alternatives to closure?

“Should I Consult?” If You Feel This Way

If your practice has experienced a decline in revenue and expenses since the COVID-19 pandemic, or if you are concerned about the impact of ending support on your business, now may be the time to consult with an expert. In particular, by considering negotiations for the release of personal guarantees and succession schemes that can transfer patients and staff before the financial situation deteriorates further, you can maximize your options. To avoid the worst-case scenario of closure, early assessment of your current situation and collaboration with experts are crucial.

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