If the revival of the IPO market continues, the sector could see up to 10 restaurant companies go public over the coming 18 months, according to serial investor Luke Johnson.
Talking at M&C Report’s Restaurant Conference 2013, Johnson, whose investments currently include Patisserie Valerie, said: “For the first time in at least seven years I have had a couple of stock brokers come and visit me and ask ‘why don’t you take one of your businesses public?’. I haven’t had that for ages, so that’s a good sign.
“I could see that if the revival of the IPO market carries on, and there are currently good signs, then in the next six-18 months I can imagine half a dozen, maybe even 10 restaurant companies going public, which I think will be terrific.”
Johnson said the sector needed a revival of the issues market.
He said: “I remember in January 1993, when we took Pizza Express public, it helped to set the IPO market alight after that recession. A whole raft of companies went public, probably half of which shouldn’t have. I think it would be very good for the sector and it would be a sort of final home for a lot of these pass-the parcel private equity-owned firms who probably need a long-term owner.
“The obstacles to this is to get the silly institutional investors in the City to realise that this is a great sector to invest in and that they should be backing British industry rather than buying Indian oil companies. They want to be investing in the businesses that they are eating in every night.”
Chris Muller, the leading academic expert in the field of chain restaurant, said the problem for the sector in attracting institutional investor was that “we don’t explain ourselves well”. He said: “No business in world has cash on cash returns like this sector. We don’t explain that well to the City and the bankers.”
However, David Roberts, head of Olswang’s leisure practice, said that institutional investors were starting to again look at the market.
He said: “There are couple of IPOs being explored at an early stage at present. I think we will see some public market plays next year. We might see going forward some aggregation plays in the coffee and restaurant sectors.
“There is currently a spectrum of investment, especially in London, from streetfood becoming bricks and mortar, to private equity investing in two or three site concepts, then there is private equity picking it up and taking it from 10-20 to 50-60 sites. There is a platform to take investments on.”
