M&A confidence is on the up for the restaurant and bars sector in the Midlands and will continue into 2013, according to accountancy and business advisory firm BDO and its Restaurant and Bars Report 2012.
Nimble operators, a shift toward quality and a renaissance in burgers and quality fast food has given the M&A market the assurance to invest in the sector. And with successful national brands including brasserie Côte, which has a restaurant in The Mailbox, and burger specialist Byron predicted to change hands for more than £100 million, the trend is expected to continue throughout 2013.
While still some way from the deal flow of ten years ago, there remains strong investor appetite for innovative concepts. The successful investments in Patisserie Valerie, Yo! Sushi and Pizza Express over the years show that good returns can be made, and for entrepreneurs and investors it is an attractive sector to be in.
Roger Buckley, corporate finance partner at BDO in Birmingham, 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, 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.”
Continuing the optimism, the Midlands will soon be home to one of the UK’s most exciting young chefs, Adam Stokes, who is opening a new restaurant in Birmingham.
The move will cement the region’s reputation for high-end dining and complement the city’s existing restaurant and bars movement that has seen Jamie’s Italian, Browns Bar & Brasserie and Fumo San Carlo open during the recession.
The BDO report says that vendors still expect to achieve healthy multiples for high quality concepts and businesses despite the current economic climate. 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.
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