M&A activity on the menu for restaurants and bars

Top chains set to be snapped up before growth in 2013 

The UK’s restaurant and bars sector can expect a significant increase in M&A activity in 2012 thanks to a combination of private equity (PE) interest, thriving chains looking to cash in and banks offloading repossessed assets reveals BDO’s ‘Restaurant and Bars Report’ out today.

While sales increases in 2012 across the sector are predicted to be minimal, expectations are that high street favorites such as Pizza Express, Côte, Giraffe, Yo! Sushi and Jamie Oliver’s eponymous chain of eateries could change ownership in 2012 as buyers rush to be in place before predicted growth in 2013 and beyond.

David Campbell, head of BDO’s restaurants and bars team, said PE houses with “money to burn” were eying up a sector whose star performers have achieved stellar growth over the last few years.

“While the economic climate is not great, going out is part of the fabric of our society,” said Campbell. “The difference is when people do go out now, they are more demanding about the quality of the experience they receive. 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.

“This makes them a very attractive prospect – especially if they have a concept that is proven to work outside the capital.”

As well as demand stimulated by PE money, Campbell added, banks saddled with assets – particularly pubs – acquired in the downturn would be looking to offload them.

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

Other predictions for next year from BDO’s ‘Restaurant and Bars Report’ include an increase in calorie and alcohol information on menus and big changes on the high street as ‘pop up’ and mobile units increase. Technology will also be a major factor as free wifi becomes the norm in restaurants and bars, and targeted promotions via mobile technology become the most potent marketing tool in the sector.

To download a copy of the Restuarants & Bars Report please click here

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