Restaurants Are Driving Growth with Acquisitions

Restaurants Are Driving Growth with Acquisitions

More companies have gone private than public in recent years, and the volume and value of M&A activity continues to rise. With trillions sloshing around in the global private equity and alternative assets markets — and the rise of family offices with fortunes to invest — it is no surprise that the foodservice industry is a hot target.

What’s also shaping up though, is that investors, analysts, and innovators alike all share a sense of optimism and enthusiasm for the convergence of technological advancements, rapidly evolving consumer dining behaviors, massive stockpiles of corporate cash and investment capital, and the opportunity that spells for future of foodservice type investments.

The foodservice industry is being reshaped globally by delivery, self-ordering, alternative foodservice formats, tech-enabled turnarounds, and quickly changing dietary preferences. We’ve all read plenty about that. But, what not everyone is seeing yet is just how much more the performance of the industry, experience for the guest, and returns for investors can be as these trends accelerate and combine with other emerging ones to create super-trends.

Here, we take a look at some recent M&A activity to identify patterns and look broadly at the benefits and outcomes of companies accelerating growth through strategic acquisitions. 

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In 2018, revenue growth among publicly traded foodservice companies in the U.S. amounted to $8.1b (+7%). Inorganic growth (that coming from acquisitions) was responsible for $2.3b of that growth — more than a quarter of the overall increase. 

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We anticipate more foreign buyers coming to the U.S., and U.S.-based investors making further investments globally. This strategy is a way to gain immediate access to a footprint, infrastructure, talent and human resources, and a regionalized know-how.

Philippines-based Jollibee, for instance, finalized its acquisition of Denver-based Smashburger in 2018. The company initially tried to expand to other markets with their core brand and they met unforeseen challenges and struggled because customers outside of the Philippines were unfamiliar with it. But Jollibee does know QSR operations well, so they looked for an opportunity in the U.S. with a large enough footprint to gain scale.

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Canadian MTY Food Group has relied on acquisitions to grow revenue and enterprise value since going public in 2010. Between 2010 and 2018, enterprise value increased by 548% and revenue grew at a 20% CAGR, propelled with about 30 acquisitions over that time.

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The success of food delivery aggregators is a worldwide phenomenon. Among European publicly traded companies, U.K.-based Just Eat saw its enterprise value double between 2014 and 2018, more than 6x the growth experienced by the eight European foodservice companies with the largest market caps. In the last few years, Just Eat has taken over smaller food delivery and takeaway companies in geographies including the UK, Ireland, Canada, France, Italy, Mexico, and Spain.

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ABOUT AARON ALLEN & ASSOCIATES Aaron Allen & Associates is a global restaurant industry consultancy specializing in brand strategy, turnarounds, and value enhancement for leading hospitality companies and prestigious private equity firms. Aaron, a third-generation restaurateur, has personally led more than 2,000 senior-level strategy engagements across 70 countries and 6 continents. Collectively, the firm's clients around the globe generate over $200 billion annually and span more than 100 countries.

Jamil D. Azar

Managing Director | Transforming Multi-Brand Restaurants | Driving Operational Excellence & Innovation | Expertise in Startups & Scaling Foodservice | Virtual Brands, Fine Dining & QSR | MBA |

5 年

Indeed too much of #disruption are happening in the #restaurant industry.

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Eldridge Bravo

VP of Sales - Engage PEO | Partner To Commercial P&C Insurance and Employee Benefits Brokers & Agents | HR Compliance | HR Platform | Cost Effective HR Solutions | Talks about #HR, #HRServices, #Compliance, #HCM #HRIS

5 年

Very interesting article Aaron. Do you anticipate higher growth in the casual dining sector or quick-serve fueled by more and expanding delivery options? Is the drift away from bricks and mortar locations, which is affecting the general retail industry influencing the restaurant industry in the same way? ?

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