UK contract catering market contains 66 ‘high-class’ acquisition targets, study reveals

Des élèves choisissent leurs plats pour déjeuner à la cantine du collège de la Chataigneraie, le 20 Juin 2011 à Autun. Ce collège expérimente un nouveau rythme scolaire où des classes "pilotes" suivent des cours classiques le matin et participent à des activités sportives et culturelles l'après midi.  AFP PHOTO / JEFF PACHOUD (Photo credit should read JEFF PACHOUD/AFP/Getty Images)

A study of over 600 contract caterers has identified a group of 66 firms that present the most appealing acquisition prospects for those looking to expand in the sector.

Plimsoll’s latest report into the largest 620 contract catering companies operating in the UK identified a total of 66 “high-class” acquisition targets which would enable prospective new owners to move into growing and highly profitable areas of the market.

Despite the fact these categories of companies are likely to cost a premium, “high-class” targets offer potential investors a real opportunity to strengthen their position in the market and allow the company to continue on its upward trajectory, according to the firm.

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23 of the listed 66 firms are currently ranked as highly profitable and would offer the chance to move into a profitable area of the market and by being privately owned could make negotiations less arduous, while a further eight companies are growing at over 10%.

The report from the business and financial publishing group also noted that the typical acquisition model – whereby a strategy revolves around acquirers looking for a cut-price deal by preying on struggling and vulnerable businesses – will need to change within the next 18 months.

Plimsoll’s senior analyst, David Pattison, explained: “It is a long-standing debate, when considering an acquisition, do you buy cheap or high value? In reality, most people’s idea of an acquisition is to wait until the business has declined so far meaning the only option is for a new owner to come in and save the business – essentially spending peanuts.

“However, we feel this approach needs to change. The acquisition strategy should be based on the direction of the current market. By acquiring a successful business, it gives both the company and the new owners a chance to add new investment and further cement their position in the market, whilst the current owners may feel they have taken the business as far as they can.”

Plimsoll’s latest study into the industry also revealed some other interesting observations about the contract catering sector. In total, 213 companies were rated as ‘strong’, 73 businesses have lost a third of their value and 211 firms are making a loss.

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