La Tasca will be the next quoted restaurant to be taken private, if speculation in the weekend’s press is to be believed.
According to Saturday’s Daily Telegraph, Friday’s 5.5p jump in the share price was down to dealers anticipating a private equity bid for the tapas bar group. We will see, but it would be no great surprise to anyone.
In recent months, Caffe Nero and Gondola have been delisted from the public markets, while Tragus, which had been tipped for a stock market entrance, was instead kept private in a £267m acquisition by Blackstone, the high profile US investor.
Private equity likes the eating-out market, and, it has to be said, its commitment to the market over the years has been hugely positive. Many of the restaurant groups that have now established themselves as major players - the Wagamamas, Yo! Sushis and Living Ventures of this world - owe much of their success to the faith shown in them by a series of private equity backers.
Private equity brings focus and makes management work hard for its money. It’s that drive that has been behind the health and dynamism of the UK chain restaurant sector, it could be argued.
But that “heads down” approach can also bring a narrowness of vision, that might be good for the individual company but is not necessarily so beneficial for the industry as a whole.
Where are the eating-out groups lining up alongside the likes of Tesco and Marks & Spencer to spell out their long-term “green” credentials and commitment to the environment, for example?
It is important because such initiatives create positive impressions for both the companies and their sector. They enhance reputations and consumer confidence.
But who in private equity controlled businesses has the incentive to plan for the long term, when five years is all they have until an exit?
There are broader issues, such as the sector’s reputation with government, that seriously concern senior managers, but who among them has the time to take off from their businesses to be involved in meaningful industry-wide initiatives? As one said to me only this week, they simply have no time to take on outside commitments, especially if they want to do a good job.
Of the four leading pure casual dining groups, only The Restaurant Group is publicly quoted, the rest – Gondola, Tragus and Chez Gerard owner Paramount - are privately held. With bigger private equity players coming in to pick up from the boutique players to finance the second or third phase of growth, this situation does not look likely to change – and a private equity move for The Restaurant Group wouldn’t exactly be a shock either.
PPM bought Paramount, Cinven acquired Gondola and Blackstone took over Tragus in deals that were all completed only last year. Stock market IPOs have fierce competition.
This would seem to leave only the handful of big restaurant, pub and leisure conglomerates, such as M&B, Whitbread, Greene King and Marstons, to take the long view on the big industry issues and commit the time and energy to industry wide interests?
Driving business is fundamental to the vibrancy and long-term future of the sector, but the industry also has some big outside challenges, not least in legislation, that need to be addressed collectively.
Are executives across the sector going to take the time to get involved, or are they going to be content to trade simply what’s thrown at them, for better or worse? Who’s going to take on the strategic issues, rather than just the tactical?
