M&A confidence is on the up for the restaurant and bars sector in Yorkshire 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 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. With Business Growth Fund’s investment in fast casual dining concept Barburrito on The Headrow earlier this year, and numerous private equity firms continuing to be linked with Red Hot World Buffet, also with a restaurant in Leeds, there is clear market evidence of investor interest in the sector.
Next year, Yorkshire will continue to enjoy the taste of America as New York-style restaurants Meat Liquor and Meat Market, currently in London, and gourmet hotdog chain Primo’s are expected to open in Leeds.
Jason Whitworth, corporate finance partner at BDO in Leeds 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.”
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
