M&A to dine out next year

Kasmira Jefford
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BRITAIN’S restaurants and bars sector is expected to enjoy a resurgence in mergers and acquisitions next year, thanks to a pick-up in private equity demand, a report by the accountancy firm BDO has revealed.

While sales across the industry are predicted to remain subdued, top high street chains such as Yo! Sushi, Pizza Express and Côte could change hands in 2012 as buyers prepare for growth from 2013 onwards, BDO said in a report publish today.

David Campbell, head of the firm’s restaurants and bars team, said private equity houses had “money to burn” after raising record amounts before the crisis, and were eyeing the sector’s cash generative chains.

“While the economic climate is not great, going out is part of the fabric of our society,” said Campbell, adding that customers, however, were more demanding about the quality of food.

“Tired venues serving overpriced food are living on borrowed time but the chains that are thriving will continue to do so next year.”

“Food prices are starting to fall and many high street landlords see food and drink businesses as a safer bet than retailers. The good operators are in a great position for when financial pressures start to ease in 2013 and consumers start to feel they have more disposable income.

Campbell added that the sector would see also increased deal activity as banks look to offload assets – particularly pubs – acquired in the downturn.

Last month Royal Bank of Scotland sold almost 1,000 pubs to Heineken, the Dutch brewer, in a £412m deal.

“Add in the fact that a number of profitable chains are approaching the point in their life cycle were we would expect a change of ownership, and you are looking at a market ripe for M&A activity,” Campbell said.

Earlier this year Wagamama, the noodle restaurant chain, was sold to private equity group Duke Street Capital by Lion Capital, its owner of more than five years.