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Mon 2nd Aug 2021 - TriSpan acquires majority stake in Pho, Marrinan made MD
TriSpan acquires majority stake in Pho, Marrinan made MD: TriSpan, the global private equity firm, has confirmed it has acquired a significant majority stake in Vietnamese street food restaurant group Pho. As revealed by Propel last week, the backer of Rosa’s Thai and Thunderbird Fried Chicken in the UK, has invested in the 30-strong Pho through its dedicated restaurant fund Rising Stars. Pho, which was founded by Stephen and Juliette Wall in 2005, has been backed by Gresham House Ventures since the start of 2018. The founders and management have maintained a significant interest in the company with Patrick Marrinan, promoted from finance director to managing director, to lead its next phase of growth, supported by TriSpan and the board. Stephen and Juliette Wall will remain in executive roles to help support the growth plan. Robin Rowland, TriSpan European Operating Partner will chair the board with Steve Hill, the former Wagamama chief executive and Pho’s current chairman, remaining on the board as a non-executive director. Launched in London’s Clerkenwell, and initially supported by ETM Group founders Tom and Ed Martin, Pho currently operates 30 restaurants, including 15 in London, and three delivery kitchen sites. It will open its next site in Lincoln’s Cornhill Pavement later this summer. Propel understands that sites in Nottingham, Edinburgh (which would mark the brand’s debut in Scotland), Cheltenham and Plymouth are also on the radar. The company, which saw revenue increase 13.2% to £38.9m in the year to February 2020, with Ebitda up 59.8% to £3.2m, said it was actively reviewing other expansion opportunities as the country emerges from the pandemic. Stephen and Juliette Wall said: “After an extremely challenging 18 months, during which time the superhuman efforts of our team and support of our landlords have helped us to weather the pandemic, it’s fantastic to receive this vote of confidence in Pho. Gresham House have been wonderful partners and we now look forward to working with Robin and the TriSpan team as we get back to what we do best, with Pat stepping up and leading the charge as managing director along with Ewan, Libby and the rest of our team.” Marrinan, who joined this business in 2017 as finance director after over 12 years as a leisure M&A specialist, said: “It’s a real honour to lead the company through the next phase of growth and, whilst this deal means we have to say goodbye to a great partner in Gresham House, we are delighted to be welcoming Robin and TriSpan to the Pho team. I look forward to continuing Pho’s exciting journey alongside our outstanding management team, with the continued support of Stephen and Jules.” Rowland said: “I am looking forward to working alongside Patrick, the founders, Pho’s proven management team and strong board to continue the evolution of this ‘honest-to-its-roots’ brand, delivering authentic, fresh and exciting Vietnamese cuisine.” Commenting on the opportunity to support Pho, TriSpan partners Fady Michel Abouchalache and Joseph-Patrick Dib said: “We are very excited at the prospect of bringing more Pho restaurants to customers in the UK and beyond. This investment is another testament to TriSpan’s commitment to the sector, especially in the face of the difficult 18 months we have witnessed in the UK and globally.” AlixPartners advised on the Pho deal.

Pho to go by Propel insights editor Mark Wingett

TriSpan’s acquisition of a significant stake in Pho should provide a timely confidence boost to a market buffeted and bruised by the past pandemic-impacted 18 months. In a month when two significant pub deals were agreed, here is one to warm the restaurant sector. One that has nothing to do with a restructuring but sees a private equity firm invest in what has always been a good business, back it to be one of the brands to lead the recovery, and hopefully provide the push for other investment funds to follow suit. It certainly feels like a long time – too long – to have had to wait to comment on a deal of this nature. For the likes of Giggling Squid, The Alchemist, Honest Burgers, Brasserie Bar Co, Bill’s, Turtle Bay and New World Trading Co – all of similar size/investment cycle as Pho, which would have also looked at exits over the past 18 months if it wasn’t for the pandemic, this news will provide much-needed encouragement and make that light at the end of this pandemic tunnel brighter. Of course, all eyes and ears will be on what the valuation of the deal was and how it was reached. I imagine TriSpan looked closely at 2019 trading figures in this respect, and of course how the business is performing now as the sector starts to move out of the crisis. Pho pre-pandemic was thought to be valued at around £40m.

Whilst most investment funds have retreated for the sector and M&A – quite rightly working out how to keep existing investments going through the crisis, TriSpan have continued to seek new acquisition opportunities. Buoyed by the success pre-covid, and resilience during, of Rosa’s Thai and the momentum that Thunderbird Fried Chicken is now showing, the fund was close, very close to investing in Honest Burgers before the first lockdown, and I understand returned to look at the Active Partners-backed business last summer. It also ran the rule over Bistrot Pierre and looked at acquiring Las Iguanas last year. While it might have been getting frustrated, Pho has always been on its radar since it entered the UK market, and before any official process was launched, which I expect would have been another 12-18 months away depending on the speed of a recovery. So, is it crazy to be doing a deal where the make-up of the next six-12 months is far from certain? TriSpan has obviously seen enough of what Pho was about pre-covid, how it has evolved and traded during the crisis and got in ahead of what would have been a competitive process. It is gambling more on the speed of the recovery than the strength of the business. 

With an interest now in some 70 restaurants, it is on track to become a significant player in UK restaurant growth. TriSpan is also getting to a scale where thoughts may at some point -post integration of its latest investment – may turn to a possible listing – a favoured route for seemingly many in the sector at present. A report over the weekend again highlighted that an IPO may be something Giggling Squid, for one, will explore, whilst Tortilla and Hawksmoor are also currently looking at this option, seen as a safe haven during the crisis, especially with the majority of private equity having left the stage over the past 18 months. I imagine many businesses are still in a wait-and-see position on looking at options – the fear that the crisis is far from over and they have little appetite for spending much-needed funds on due diligence fees to find the listing window has closed due to some new variant scare. It still won’t be easy to get IPOs away. For more investment to return to the sector we need a winter without issues and a resolution to all the debt many companies are now holding, which have damaged balance sheets, and the rent situation, but the Pho deal is a step in the right direction.

TriSpan now backs two of the up-and-coming stars of the Asian restaurant category in the UK, two brands hoping to follow in category leader Wagamama’s footsteps. And although it is tempting to speculate that it could be ready to repeat what Gondola Group (now Azzurri) did in the Italian category (PizzaExpress, ASK, Zizzi and Coco Di Mama) – and I still think there is an opportunity to an Asian cuisine equivalent – it is understood that Pho and the Gavin Adair-led Rosa’s will remain very much separate entities – ones that TriSpan will see as complimentary. The question of how each brand expands and overlaps will have obviously already been thought about – they have at times competed on sites. It is not a bad problem to have. The arguably more sophisticated Pho has been gaining considerable traction outside London, and there is plenty of runway still to be had in city centres and university towns across the UK. I understand that Pho had been tentatively looking at exploring a smaller format pre-covid and it is something it and TriSpan may return to in due course. Then there is Rowland’s background taking YO! international, which will surely also be in Pho’s future. As for most in the sector, delivery has played a significant part in Pho being able to navigate the crisis, and the business would have learnt a lot over the period on how it will evolve its delivery offer. It was already at 20% of its sales mix pre-covid and would have increased over the past 18 months. The company has strengthened its relationship with Deliveroo during that time, opening its first three delivery kitchens, with more expected to follow.

Pho will enter this new era with a new managing director. Patrick Marrinan has spent the past four years immersing himself in the business. Whilst the company would have previously looked outside for its next leader, it is thought that over the past two years, the work that Marrinan has carried out – especially aided by operations director Ewan McDonald and marketing director Libby Andrews, has made that conversation mute. There won’t be many first-time managing directors who would have just steered their business through the impact of a global pandemic, or that can call on the experience and knowledge that the Walls, Steven Hill and now Rowland can call upon and provide. Marrinan’s first task will be to make sure the business is ready to come out of the traps when the recovery begins to gain momentum. The company, which said earlier this year that it expected a 45% reduction in total turnover for the year to February 2021, is thought to have traded ahead of expectations since reopening of the sector began. With new investment behind it, and a differentiated product and attractive price point, it is in a better position than many to make sure it is again amongst the leading pack.

Finally, a word for the Walls, who pre-covid would have seen a number of their peers secure the exits from their respective businesses, that with the pandemic, they thought might have eluded them for a few more years. They have built a business that is as well placed as any to bridge the significant gap in size and reach between Wagamama and the rest in the fast-casual/casual dining Asian category. Of course, there are still struggles and battles ahead for the sector, but here is a rare M&A bright spot for the restaurant sector in what has been a dark year and a half. Let’s hope it is a catalyst for more, with the likes of Azzurri Group, Cote, Friday’s and The Big Table Group amongst those still looking to add to their portfolios. I’m sure many in the sector will be raising a glass to the founders of Pho tonight, and hoping that they will soon be doing the same.

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