Are Singapore’s mom and pop dental clinics facing a bad case of decay?

Q&M's acquisitions, for instance, contributed just $400,000 to the group profit.

If recent acquisitions of some well-loved dental practices by larger listed competitors are anything to go by, the answer may be yes. Q&M Dental Group was the latest to snap up three small practices, buying Ho Dental Surgery, Toofy and Jurong Point Dental Surgery. As far as acquisitions go these are small, with the combined three contributing just $400,000 a year in profit to the group and the purchase price of around $3 million.

There are 1,000 dental clinics and Q&M operates around 70 of them, so there is certainly room for more acquisitions, especially as the group still has $23 million of borrowing capacity from a MTN loan facility.

Dr Edgar Kieu, deputy director at Raffles Dental, also noticed a trend of consolidation in the industry and identified two main factors leading to the push for acquisitions. Firstly, stiffer competition with rising costs is driving a need to leverage on economies of scale to survive thinner margins. Another interesting thing driving the consolidations is senior dentists seeking to sell their practices in view of retirement planning. According to Dr Kieu, “As practices being more expensive to takeover, younger dentists seeking to join the private sector are less able to afford the takeover costs and hence these practices are more keen to be acquired by larger dental groups.”

But while there is a growing interest in acquisitions among some dental groups, Raffles Dental still prefers banking on organic growth. “Raffles Dental has grown significantly in the past 3 years, fuelled by a greater demand for quality dental care services, similar to that provided by Raffles Medical. While acquisitions have their upsides, our organic growth strategy has allowed us to maintain our high standard of care across the network and standardise practice protocols, equipment and materials,” adds Dr Kieu.

Patrick Wong, head, Unity Denticare, NTUC Health, says the dental market in Singapore is currently fragmented with a few group practice and many individual operators. “It is large and varied enough to allow for healthy competition, and to offer greater choice and better value.”