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Thu 13th Jul 2017 - Foodservice companies expected to use acquisitions to provide synergy savings and offset increased costs
Foodservice companies expected to use acquisitions to provide synergy savings and offset increased costs: Foodservice brands are expected to turn to acquisitions to provide access to synergy savings to offset increasing cost pressures and deliver growth as they scale back roll-out plans, according to a new report. As a result, BDO corporate finance director Tom Barnard said he would not be surprised to see companies such as Azzuri Group, Prezzo, Cote and Casual Dining Group acquire other brands. Writing in BDO’s summer edition of the restaurants and bars report, Barnard said despite the challenging market conditions, the company still expected to see mergers and acquisitions activity over the next six to 12 months. He expected there to be continued private equity interest in differentiated, scalable concepts while the weakness of the pound would continue to make UK businesses more attractive to foreign investors. Product expansion also has the potential to open up new avenues of growth such as Azzuri Group’s acquisition of Coco di Mama and Whitbread’s acquisition of Pure. Barnard said opportunistic site deals may well increase as troubled operators become the prey of well-funded brands looking to expand. He added: “Mergers while presenting a number of practical challenges around independent business valuations and synergy sharing could offer an appropriate solution for smaller operators who could benefit from combining forces and sharing head office functions. There are a number of attractive businesses expected to come to market over the next couple of years. Artisan bakery Gail’s and Caribbean eatery Turtle Bay are at the top of the list of stellar concepts being watched carefully. Vietnamese restaurant group Pho is expected to attract a lot of interest should it come to market and Bill’s, following a management reshuffle, will likely consider its options at some point. The Thai and south east Asian market is active with companies such as Giggling Squid, Thai Leisure Group, Koh Thai, Busaba and Rosa’s all looking to lead the category. Japanese staple ramen is proving popular in London thanks to operators Tonkotsu and Bone Daddies. Cabana and Fazenda are giving Brazilian food a presence at the table. Hotcha and Zing Zing are certainly ones to watch. Given the UK’s love of Chinese takeaway, both concepts are excited about developing the first branded national Chinese takeaway and are growing quickly. Adding to the melting pot is a stream of arrivals from the US. Following the success of Five Guys and Shake Shack, MOD Pizza and Wingstop are newcomers to the UK and we wouldn’t be surprised to see more follow as UK consumers remain loyal to well-known brands. There is some good news for listed companies too. Patisserie Valerie is trading well and David Page’s Fulham Shore continues to perform, led by the growth of pizza category disruptor Franco Manca.”

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