In the past fortnight three pub companies, Young & Co in London, Belhaven in Scotland and Laurel, have all announced that they would love to be buying more outlets û but they just can't get the deals at the right price.
A large part of the problem appears to be the solidly realistic approach post-September 11 catching up with the inflated expectations of the previous two years. It does not just apply to pub companies: this is why Whitbread was forced to take such an embarrassing price for the Cafe Rouge and Bella Pasta chains, just half their book value, when it finally sold them to Tragus. For the same reason Wolverhampton & Dudley has had to accept that it will not find a buyer for Pitcher & Piano at anything like the sum it originally wanted, and it had better try to sort the chain out and get the best returns out of it for itself.
Another difficulty appears to be that what is being offered is frequently run-down and in need of considerable refurbishment. There are two types of operator that thrive in this situation. One is the small and fleet-of-foot, such as Jennings Brothers in Cumbria, who can nip in and secure quick single deals on suitable pubs before other operators can get the necessary approval from higher up the management chain. The other is the specialist who deliberately seeks out the poorer pubs larger companies drop through churning, and buys them to turn around.
Not all big companies are too slow to pull off single-pub deals: Punch Taverns and Enterprise Inns may be making headlines with big deals, but both are picking off good, solid free houses where they can: Punch, in particular, has been adding almost a pub a day through mostly small deals over the past nine months or so.
For Laurel, however, now it is concentrating on being a managed pub company, the problem is rather different: good managed pubs do not generally come as single offers, but good managed pub companies do not generally want to sell up. Laurel's aim is to add another 200 outlets, to give it sufficient substance for a successful stock market float (and avoid any embarrassment of the sort that almost ruined Punch's launch on the London Stock Exchange). The nature of the managed pub company market, however, means that there is no single suitable target that would let it achieve this, which means three or four smaller takeovers might be necessary, all very time-consuming and distracting.
The lack of suitable-sized targets also raises another question: is this because the natural size of a managed pub company, accepting exceptions such as Spirit and Six Continents, is really about 60 to 80 outlets, or are we going to see the kind of consolidation on the managed side already achieved on the tenanted side, so that concerns the size of Laurel and Spirit are regarded as the evolutionary peak? Time, as it generally does, will tell.
A large part of the problem appears to be the solidly realistic approach post-September 11 catching up with the inflated expectations of the previous two years. It does not just apply to pub companies: this is why Whitbread was forced to take such an embarrassing price for the Cafe Rouge and Bella Pasta chains, just half their book value, when it finally sold them to Tragus. For the same reason Wolverhampton & Dudley has had to accept that it will not find a buyer for Pitcher & Piano at anything like the sum it originally wanted, and it had better try to sort the chain out and get the best returns out of it for itself.
Another difficulty appears to be that what is being offered is frequently run-down and in need of considerable refurbishment. There are two types of operator that thrive in this situation. One is the small and fleet-of-foot, such as Jennings Brothers in Cumbria, who can nip in and secure quick single deals on suitable pubs before other operators can get the necessary approval from higher up the management chain. The other is the specialist who deliberately seeks out the poorer pubs larger companies drop through churning, and buys them to turn around.
Not all big companies are too slow to pull off single-pub deals: Punch Taverns and Enterprise Inns may be making headlines with big deals, but both are picking off good, solid free houses where they can: Punch, in particular, has been adding almost a pub a day through mostly small deals over the past nine months or so.
For Laurel, however, now it is concentrating on being a managed pub company, the problem is rather different: good managed pubs do not generally come as single offers, but good managed pub companies do not generally want to sell up. Laurel's aim is to add another 200 outlets, to give it sufficient substance for a successful stock market float (and avoid any embarrassment of the sort that almost ruined Punch's launch on the London Stock Exchange). The nature of the managed pub company market, however, means that there is no single suitable target that would let it achieve this, which means three or four smaller takeovers might be necessary, all very time-consuming and distracting.
The lack of suitable-sized targets also raises another question: is this because the natural size of a managed pub company, accepting exceptions such as Spirit and Six Continents, is really about 60 to 80 outlets, or are we going to see the kind of consolidation on the managed side already achieved on the tenanted side, so that concerns the size of Laurel and Spirit are regarded as the evolutionary peak? Time, as it generally does, will tell.
