The financial stability of the hospitality and catering industry like many industries can in part be measured by looking at who is in the market to buy businesses. Last year’s Brexit decision has made the measurement of business indicator data somewhat more complex, including mergers and acquisitions.
Mergers and acquisitions activity across the hospitality and catering sector shows activity remaining steady, despite the uncertainty created by Brexit. In a report by Grant Thornton the strength of M&A activity is generally attributed to continued private equity and trade investment, that remains resilient and cash generative.
The review finds that there were 74 deals completed in 2016. While the total number of transactions is very similar to the previous two years, 2016 saw a leap in total disclosed deal value. Total disclosed deal value rose from just over £1 billion in 2015 to £2.7 billion in 2016, although this figure is somewhat inflated by Heineken’s provisional agreement to purchase Punch Taverns, in a potential deal worth £1.8 billion.
Private equity investment continued to perform strongly last year with 19 transactions, representing 25% of the total deals completed. Private equity transactions last year included Kings Park Capital taking a significant stake in 7Bone, a casual ‘better burger’ concept restaurant, and Business Growth Fund investing in Glasgow-based Asian restaurant chain Bar Soba. Will Baxter, Head of Hospitality at Grant Thornton UK explains: “Private equity will continue to invest in smaller brands with ambitions and potential for a roll-out, as they look to identify the next strong casual dining brand.”
In addition to private equity investment, trade acquirers also picked up in 2016, such as South African-based Famous Brands, owner of the Wimpy burger chain, who acquired Gourmet Burger Kitchen for £120 million.
It will be interesting to see if merger and acquisition activity in hospitality and catering increases in 2017, lower exchange rates for sterling could make many UK business look like good value.