Is PE's Appetite for Restaurants & Bars Returning?
April 18, 2014
Beringea's additional funding of U.K.-based Coal Grill & Bar, detailed below, not only brought to mind a sizzling, thickly peppered steak seared with a sprinkle of lemon juice, but also raised the question: are PE investors putting their money where their mouths are, or are they wary of the volatile restaurants & bars industry?
The PitchBook Platform uncovers 336 companies in the global restaurants & bars industry that have been backed by PE firms since the start of 2007, with a peak of 65 deals each in 2008 and 2012. 2009 recorded a precipitous decline in activity (only 37 deals), before activity recovered in the ensuing years. Restaurants & bars as an industry serves as a useful indicator of consumer confidence; it's easy to associate the depths of the recession with the drop in consumer spending and subsequent decline in investor confidence in 2009, yet as the global economy recovered its footing from 2010 to 2012, PE deal activity did likewise.
2014 is off to a slow start thus far, the slowest start, in fact, since 2010, which logged around seven deals as well by the middle of April. This could be due to the decrease in lower-middle-market deals: together around 71% of the deals are for $100 million or less, yet even though the smaller deals have resurged to 16 and 17 in 2012 and 2013, the deals in the $25 million to $99 million range have not reclaimed their 2007 high of 14 deals. Or perhaps sit-down restaurants & bars are losing business to services like GrubHub, an online food ordering platform, and PE firms aren't making as many reservations in the traditional model these days.