Jeremy Over was part of the legal team that helped advise and see through the recent sale of Corney & Barrow’s bar division to Drake & Morgan. So how does he see the future of the restaurant and bar sector post Brexit? Where will the future opportunities and pressure points lie?
What impact will Brexit have on the restaurant and bar scene. Jeremy Over, partner at Moore Blatch solicitors, who advises on many high profile deals, looks in to his crystal ball.
In the first part of the year experts were calling the top of the market in terms of M&A activity within the restaurant sector. Buyers, a large number of which were private equity, were paying prices not seen before the financial crash.
Rarely had the sector been in such rude health. Pizza Express, Las Iguanas, La Tasca, Cote, Gaucho, Byron, Ask, Zizzi, Strada, Prezzo and many more major restaurant chains changed hands in just an 18 month period with some private equity groups paying up to 12 times a restaurant’s earnings before interest.
But thanks to issues like Brexit uncertainty and changes to the minimum wage, the market has become a little less frothy. Personally I don’t foresee a significant cooling as deals are still going ahead – most recently we advised on both the Corney & Barrow sale to Drake & Morgan and a large financial restructuring to allow Rosa Thai to expand.
However, there are things that should be considered. For example, as the expected restrictions on immigration come into force the on-trade could see higher labour costs, or indeed labour shortages.
The weakened pound means higher costs for imported food and wine, and the forthcoming rise in minimum wage is expected to hit the food and accommodation sectors hardest with a 3.4% increase in wage bills. On the other hand, more foreign visitors for certain locations could provide a boost.
What is clear is that the UK is strong when it comes to creating strong on-trade brands that, with the right backers, can be scaled up to exploit their inherent mass market appeal.
Small chains like Coco di Mama, Giggling Squid and Honest Burger have recently been snapped up in multi-million pound investments, and this trend is reflected elsewhere. For example, Britain has come to dominate the craft beer industry and as brewery behemoths adapt to the fashion for craft beer, take overs are very much in fashion.
Over the past decade the on-trade has proved its resilience and, combined with level of flair and innovation we are seeing at present I have no doubt it will ride out the storm of this new and potentially challenging landscape.