The next two to three years will be a “very busy period” for private equity investment in the pub industry, with wet-led leaseholds outside London being a major target, Sapient Corporate Finance founder Peter Hansen has predicted.
Speaking at M&C Report’s Pub Retail Summit, Hansen also predicted the return of M&A in the sector.
Hansen pointed to the fact that private equity firms such as Piper and LGV have returned to the sector this year with investments in Loungers and Novus respectively, along with new investors such as Värde Partners with its investment in Bramwell.
“Do we think this is going to continue? To stick my neck out, the answer is we do, and we think that we will see a significant increase in the next 12 months.”
Hansen said private equity has a “huge amount of money to invest” because the volume of investments during the economic crash declined but the amount of money didn’t change; anything not invested would go back to the limited partners.
“There are a number of private equity firms, some with a different focus, who want to get back into pubs. So we think it’s going to be a very busy period over the next two to three years.”
Hansen said private equity “loves the cash generation of the pub industry”. He said wet-led leaseholds outside London would be sought because they are “better value”.
In terms of likely acquisition targets, Hansen highlighted Whitbread’s restaurant business, Orchid, Inventive, TCG, Liberation Group and Intertain.
Hansen highlighted that total transactions in the sector from 2008 onwards have been £1.2bn, about the same as in a good year pre-downturn.
In terms of trade buyers, Hansen said: “Our view is they are going to have to go back to the M&A market because they can’t continue to generate growth without the use of M&A.” He said Greene King is “leading the way on this” with its recent acquisition of the likes of RealPubs.
Hansen added: “M&B [Mitchells & Butlers] is doing and excellent job, Spirit is doing an excellent job with its like-for-likes but at some point the level of investment they’ve got in their pubs is going to have to slow down and they’re going to have to return to M&A.”
