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Dave’s Dispatch: Proof Positive
March 23, 2007

David Farkas Senior Editor, Chain Leader Read Bio

What do Huddle House, Outback Steakhouse and Sbarro’s have in common (other than they’re all chains)? Each company announced a transaction with a private-equity sponsor in 2006.

“Equity funds were clearly the most visible buyers in auction by sellers seeking the highest bidders,” says David Epstein of the J.H. Chapman Group, investment bankers who recently released the 2006 Chain Restaurant Merger and Acquisition Census. In addition to equity-sponsored buyout, the PE funds accounted for 30 percent of all private company transactions, he adds.

To be sure, billions of private-equity dollars are looking for a return. That so much attention has been devoted to restaurants is a clear signal that those outside the industry now understand a restaurant brand’s ability to achieve sustainable growth —even during downturns. And that they are willing to pay a high multiple for it.

As Jim Parish of Parish Partners told Chain Leader last April: “Unless none of the recent transactions are successful (which I find unlikely), the heightened exposure and visibility for the industry will be a significant benefit to the companies in the industry, and indeed to the investors themselves as they become more knowledgeable.&rdquo

Posted by David Farkas on March 23, 2007 | Comments (0)