The number of UK private equity deals for companies in the leisure sector has more than doubled from 12 to 26 in the past year, according to research by one of the City’s biggest law firms.
Private equity funds are taking the opportunity to pick up assets at comparatively low prices ahead of the leisure sector’s full recovery from the pandemic, lawyers at Mayer Brown told City A.M. this morning.
High-profile transactions in the past year include deals for hospitality and leisure venue operator Boxpark, best known for its venue in Shoreditch, as well as mini-golf company Puttshack and pub & bar operator Punch Pubs.
According to the firm, turnaround funds in particular have been looking to buy up businesses in the sector at a discount to their net asset value.
These may have been businesses that were able to “stay afloat” and demonstrate resilience during the pandemic but may still be perceived by other potential bidders as struggling. They may also be facing further difficulties or becoming less of a focus as international travel ‘resumes’.
The lawyers added that because UK-only businesses as a whole have been trading at a discount to their international peers, some UK leisure businesses have become particularly attractive to PE funds.
There have been four private equity deals for travel companies in the last 12 months, compared to none the previous year, which comes as the travel sector bounces back from the pandemic.
Not all investments in the leisure sector are recovery or turnaround plays. Many of the deals target niches within the leisure sector that are seen as areas of high growth, Mayer Brown did say.
Since the pandemic, the UK leisure sector has seen several new operators with innovative models entering the market.
For example, Boxpark and Puttshack offer relatively new concepts and have both been looking to expand rapidly.
“UK leisure is primed for a bounce back and private equity firms know this,” said Electra Callan, private equity partner at Mayer Brown in the City.
“The sharp rise in deals reflects the confidence funds have in the sector’s turnaround and the growth opportunities available, even for those that have done well from the recent challenges to the sector.”
“There are still excellent returns on offer for PE funds in the leisure sector if they look in the right places. In the last 12 months many have clearly taken the opportunity to pick up assets with huge potential.”