Nimble operators, a shift toward quality, and a renaissance in burgers and quality fast food has given the M&A market the confidence to invest in the UK’s restaurant and bars sector, and the trend will continue into 2013.
This is the prediction of BDO’s ‘Restaurant and Bars Report’, with successful brands like brasserie Côte and burger specialist Byron likely to change hands for more than £100 million.
If these numbers prove to be correct, it will show that vendors still expect to achieve healthy multiples for high quality concepts and businesses despite the current economic climate, the report explains. In addition, with private equity dependent on exit as well as investment opportunities, the number of PE-backed concepts in the sector lends weight to the argument that there will continue to be a healthy level of deal activity.
While still some way from the deal flow of ten years ago, strong concepts such as ‘fast casual’ dining and revamped buffet outlets – particularly in London or the South East – are attracting trade interest as well as debt and equity investors.
David Campbell, head of BDO’s restaurants and bars team, said:
“Four years of recession have seen people focus on value for money, but that doesn’t mean they won’t pay a premium price for a quality product.
“Gourmet versions of authentic street food classics like burgers, hot dogs and chicken, and concepts like artisanal bakeries have sprung up in the teeth of a recession and people still queue around the block.
“Investors see a clever idea backed by strong, entrepreneurial management teams and they know they won’t be the only suitor. There are plenty of reasons to be optimistic about the M&A in this sector next year.”
Further predictions for next 2013 from BDO’s ‘Restaurant and Bars Report’ include:
- Modest growth encouraged by improving demand and easing restriction of consumer spending
- Less mass discounting, such as ‘two for one’ offers
- Growth in ‘fast casual’ outlets and concepts
- The major pub operators investing in dining to mitigate the impact of falling beer volumes and wet-led pubs focusing on premium priced craft and cask beers
- Specialist, high quality ‘artisan’ coffee brands starting up their own outlets to showcase their products
- Climbing rents in prime locations and flexible formats designed to snap up empty retail space
- More success for ‘healthy’ chains and more ‘light’ options on menus
To download a copy of the full report please click here