The wet-led community pub segment remains a “very resilient” part of the market, as consumers skip meals out but continue to enjoy a drink, James Maizels, co-founder of FB Taverns tells MCA.
Speaking after FB Taverns acquired a package of 27 tenanted pubs from Cameron’s Brewery, Maizels said despite consumer demand holding up, there was a good opportunity to enter the market “from a value perspective”.
Meanwhile he suggested over-leveraged businesses forced to sell by their banks could be the next driver for M&A activity in the pub market.
The investment vehicle, which is backed by Alexander Embiricos, the co-founder of virtual office provider Remotion, has a long-term outlook, and will remain disciplined about future acquisitions, Maizels says.
Having entered the pub sector last year with a deal for a seven-strong package from Admiral Taverns, Maizels sees a strong opportunity in the community wet-led segment, due to its simpler operating economics and value price-point.
“We think there’s an attractive point in the market to be buying this type of pub,” he tells MCA. “Part of our thinking is it seems to be a very resilient part of the market.
“With the rising cost of living, people continue to go out for the for their pint, even though they might be going out for food a bit less.
“Although it seems the market overall has been holding up quite well, the thinking was with these headwinds on the horizon, it was a more resilient place to be.”
Maizels previously worked at Deutsche Bank, where he advised on Platinum Equity Advisors’ £700m bid for Marston’s.
During this time, he became interested in the sector, particularly the community wet-led segment.
FB Taverns currently works with Billy Buchanan at LT Management, who was also involved in the Marston’s bid, to operate the pubs alongside tenants, with plans to develop in-house expertise further down the line.
As the new Cameron’s pubs come across, FB Taverns plans to invest on improvements to drive business and motivate tenants.
“These are reasonably tired pubs, they haven’t been focused on for a bit, so they will benefit from a bit of love and attention,” he says.
Maizels hopes to emulate the success of Red Oak Taverns, which also used LT Management for third-party management until it reached 100 sites.
Speaking about the market dynamics for acquisitions, he suggested the economics shock of the past year or so would continue to reverberate even if those headwinds recede.
“Over the last year, the market’s moved obviously,” Maizels says. “With headwinds like the cost of living, supply chain and inflation, the feeling was that the market was going to be tough, and people were going to spend a lot less
“I think that did impact value. But the drivers appear short term and provide a good opportunity to enter the market from a value perspective.
“I think the market is shifting now, the actual underlying dynamics of consumer demand remain reasonably strong.
“What’s shifted is you have the inflation and interest rate shock coming through, and that might also provide an opportunity over the next year, as some over levered businesses get strong armed by their banks to sell. Maybe that’s the next driver.
“It feels there will still be opportunities to buy with value hat on for at least the next year - even though the underlying drivers of that might have shifted.
“We’re optimistic, we’re trying to keep growing while we can.
“There’ll be a time when valuations go the other way, and at that point we’ll be holders of pubs rather than acquirers of pubs. We don’t intend to overpay, we’ll be disciplined.”
