Côte Restaurants and The Alchemist are recent examples of an increasing appetite by private equity to invest in the restaurant sector. Whether as a direct investment, buy-out by an investor or a trade sale to one of the larger groups, the drivers for this are clear. Consumers appear confident, the short term economic outlook is positive and investors have money that they are keen to put to work. Some of the larger groups are also looking to grow faster than may be possible organically.
The primary targets are entrepreneurs with an established group of restaurants; typically 20 or more. For those in this category, it is possible investors or potential acquirers will get in touch, keen to start a dialogue. These conversations need not of course lead to an immediate transaction. But, they are nearly always worth exploring because they can open the door to joint ventures and other collaborations that may be useful in the future. Before you start a dialogue, it is valuable to have an honest conversation with the current shareholders and executive team to clarify objectives and identify areas of alignment or perhaps misalignment that a transaction may be able to solve.
Transactions come in all types of flavours from a "clean break" for shareholders with value being fully realised at completion, right through to a "buy-out" where the majority, if not all, of the investment is made to grow the business. In the latter scenario, existing shareholders maintain ownership, albeit alongside a third party investor. The opportunities are certainly out there. But, it will be the clarity of purpose at the start that will help determine whether a change in the existing ownership structure of the business is really needed. This clarity will also help to ensure that any transaction is designed to deliver what the business needs.
First published by The Caterer on 30 October 2015.
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