Pubs provide cheer to M&A activity
By Gareth Iley, partner at Clearwater International
This month it was announced that Birmingham received 41.8m visitors in 2017, who spent a grand total in excess of £7bn in the city. This contributed to a 7.2% increase in the number of full time roles supported by the visitor economy, up to 75,748 jobs.
Events such as the Natwest T20 cricket finals day, the arrival of Dippy the Diplodocus to the Birmingham Museum and Art Gallery, and Birmingham Weekender all helped to bring tourists to the city.
Gareth Iley, partner at Clearwater International
May was a month for larger deals in the Midlands. Solihull-based pub group Hawthorn Leisure was acquired by real estate investor NewRiver REIT plc for £107m. Hawthorn Leisure has a portfolio of 289 community pubs, including managed pub brand Last Orders, which focuses on live entertainment.
After a period of decline within the pub sector, the market is beginning to see signs of growth again.
Casual dining chains had dominated M&A within the sector, but investors are increasingly seeing that pubs have a number of key advantages. These include stronger heritage brands, proximity to the consumer, greater pricing flexibility, the ability to provide live entertainment and lower rent and business rates. The investment takes NewRiver’s pub portfolio to 629 pubs.
Clearwater International has recently seen activity in this space, having recently advised PubLove on its new venture with Ei Group; and Simmons Bars on raising debt finance to support its MBO.
Another Midlands-based food & beverage deal this month, saw Herefordshire-based Tyrrells receive an offer from the Intersnack Group, which will become its third owner in two years subject to regulatory approval.
Tyrrells’ previous owner, Amplify Brands, was acquired by US chocolate brand Hershey’s in December 2017, which prompted a change in strategy for Amplify. Tyrrells strengthens Intersnack’s geographical presence across Europe and Australia, through its brands Tyrells, Yarra Valley and, Lisa, the organic potato chip brand.
Solihull also saw UK Power Reserve, a flexible distributed energy group sell to Sembcorp for £340m. UK Power Reserve had previously been owned by private equity investors Equistone Partners and Inflexion, and now employs over 150 staff, with revenues of c.£80m. Sembcorp primarily acquired the business to deepen its presence in the UK.
UK Power Reserve’s assets will help to supplement renewable power supplies. Sembcorp is also seeking planning permission to develop two combined-cycle gas turbine units of up to 1700 MW, as it carries out an ambitious expansion strategy.
It is really positive to see that successful Midlands businesses, which have previously undergone transactions and have already implemented ambitious expansion strategies both in the UK and international markets, are still finding new acquirers and investors to support the next phase of their development.
