Pubs sniff out the cash as hungry investors circle

After years of playing second fiddle to casual dining brands, pubs are finally whetting the appetite of investors again, it was claimed this morning.

The ‘return of the pub’ is set to play a dominant role in the M&A market over the next few years, according to accountancy and business advisory firm BDO, which today published its latest Restaurants and Bars Report.

High quality pub businesses are in high demand as craft beers, spirits and experiential propositions continue to pull in the punters and create strong returns for investors.

In addition, with consumers revelling in the prolonged hot weather and England continuing its World Cup run, the sector is set for a bumper summer which will further pique the interest of those looking for attractive returns.

Unlike the casual dining sector – which has seen a number of high profile businesses struggle including Jamie’s Italian, Prezzo and Strada – pubs are enjoying the attention from a broad and varied trade buyer pool, with large and regional brewers said to be looking to boost their distribution capability through acquisition.

Private equity (PE) interest remains strong for operators with differentiated propositions. Pub groups such as ETM, New World Trading Company and Brewhouse & Kitchen are all rumoured to be in PE conversations.

Mark Edwards, head of the restaurant and bars sector at BDO, said: “Pub numbers have gradually fallen over the last few decades. The trade has been dealt blow after blow with legislative changes, falling discretionary spending, sky high rents and cheap supermarket alternatives. But things are definitely looking up. Demand has now met supply and that has presented an opportunity for differentiated operators to deliver strong like-for-like growth.

“The casual dining market on the other hand remains challenging; competition is high, margins are being squeezed and the future looks tough for those that aren’t best in class for concept (to entice consumers) and operational performance (to protect margins).”

BDO says conversations with investors are centred on experiential, localised and tailored pub experiences that are driving up margins.

Mr Edwards added: “Quality pubs have proved to be resilient assets. They have played an important part in our high streets, cities and local communities for hundreds of years and have successfully adapted to ever-changing consumer demands. There are a number of exciting, fast-growing managed pub and bar groups that are likely to be on the radar of investors. We can expect a wave of consolidation in the next 12-18 months.”

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