Valuation for buy-in / buy-out

Dental practice buy-in & buy-out valuations

When an associate buys into a practice — or a partner is bought out — the share is valued by first valuing the whole practice on an adjusted-EBITDA basis, then deriving the specific interest, accounting for whether it carries control. An independent valuation protects both the incoming and the outgoing party.

Prepared by Juen Phie, CA ANZ · 20+ years advising medical & dental practices

Why a buy-in valuation is different

Valuing a partial interest isn't the same as valuing a practice for sale. A non-controlling share may be worth less per-percent than a controlling one; the assets and liabilities that transfer with the interest have to be pinned down; and — most importantly — two parties with opposing interests both need to trust the number. That's where an independent valuer earns their keep.

How a share is valued

1. Value the whole practice — adjusted-EBITDA capitalisation, cross-checked against gross fees and comparables.
2. Derive the interest — apply the percentage being bought or sold.
3. Adjust for control — consider whether a minority discount or control premium applies, based on the shareholders' or partnership agreement.
4. Confirm what transfers — equipment, working capital, debt and any loan accounts attaching to the interest.

Independence protects both sides

Because we don't broker sales and have no stake in the deal, the same figure stands whether you're the principal offering equity or the associate buying in. That even-handedness is what keeps a buy-in from stalling over the number.

Staged buy-ins

Many practices bring associates in over several tranches. We can value the practice at each stage on a consistent basis, so successive buy-ins are fair as the practice grows.

Frequently asked questions

How is a share of a dental practice valued for a buy-in?

First the whole practice is valued on an adjusted-EBITDA basis, then the specific interest is derived — accounting for whether it carries control, and what assets and liabilities transfer with it.

What is a minority discount?

A non-controlling share can be worth less per-percent than a controlling one, because a minority owner can't direct the practice alone. Whether a discount applies depends on the shareholders' agreement and the specific interest.

Is goodwill included when valuing a buy-in?

Yes — the practice's going-concern value (including goodwill) is the starting point, before the interest and any discount are applied.

How much does it cost to buy into a dental practice?

It depends entirely on the practice value and the size of the interest. An independent valuation gives both parties a defensible figure to negotiate from.

General information only, not financial or valuation advice for any specific matter.