If there were any doubts that private equity firms were reluctant to invest in the restaurant sector then 2014 banished those in spectacular fashion. BDO’s winter Bar & Restaurant Report provides a fascinating account of the major M&A activity that has altered landscape. Here, in its words, is a rundown of the moves that are leading to new expansion and growth opportunities for some of the market’s top foodservice chains.
Several high profile deals coupled with numerous additional sector transactions suggested a renewed investor confidence when we commented on the marked uptick in M&A activity in our 2013 deal review. We’re delighted to say that deal activity continued into 2014. Deal volumes remained consistent with last year and there is cause for further optimism in terms of future transactional activity.
Private equity continued to play a significant role in sector deals. Last April, Palatine PE backed the MBO of premium-casual Italian dining chain Gusto from the Living Ventures Group. The deal provided an exit for The Restaurant Group plc and an opportunity for managing director Sue Crimes to take the brand national, with support from founders and highly respected operators Jeremy Roberts and Tim Bacon.
Just prior to that, Risk Capital-backed Patisserie Holdings grabbed sandwich chain Philpott’s, then later listed on AIM in a £170m flotation, giving the group a solid platform for further expansion of its brands. In perhaps a further sign that the capital markets are again a realistic option for restaurant groups, David Page’s Fulham Shore vehicle acquired The Real Greek and listed on AIM, with a stated ambition to grow the Mediterranean brand and also consider potential acquisitions.
The summer saw the most significant deal of the year in terms of value when Chinese PE house Hony Capital picked up PizzaExpress, delivering a £900m valuation for Cinven-backed Gondola. More recently, the other two pieces of the Gondola jigsaw were snapped up by Bridgepoint, who paid £250m for the ASK and Zizzi brands.
Earlier, in yet another Italian restaurant deal, the board of Prezzo recommended to shareholders an offer from Texas-based buy-out fund manager TPG to take the Kay family’s Italian chain private, in a deal which values the group at just over £300m. All three of those deals are fantastic examples of overseas and UK investors seeing real value in scalable UK brands.
In other deals, Searcy Tansley & Co, the high-end caterer and operator of such venues as the Champagne bar at St Pancras International and the top three floors of The Gherkin, was sold to Baxter Storey and Benugo owner Westbury Street Holdings, and consumer-focused investors Piper Private Equity invested in Chester-based charcoal grill concept Hickory’s Smokehouse.
Hugh Osmond made a headline-grabbing return to the sector when his Sun Capital investment vehicle picked up Strada from the Tragus portfolio, and Intertain went walkabout when Better Capital bought the Australian bar operator for a reported £20m.
The pub sector saw an upsurge in activity, too. Hawthorn Leisure, the Avenue Capital Group-backed pub group, added North West wet-led pub estate Nectar Taverns to its portfolio having acquired 275 pubs from Greene King earlier in the year, and LGV secured an exit from Amber Taverns with a sale to previous owners MaxCap Partners in an £80m deal. Furthermore, Greene King’s offer of £774m has recently been accepted by Spirit’s shareholders, rounding off a busy year of deals.
View the full Restaurants and Bars Report here.