Hansen: private equity to eye pubs

Private equity will be looking to invest back into the tenanted pub market, Peter Hansen, founder of mergers and acquisitions advisor Sapient Corporate Finance, has predicted.

He said that despite the fact there had been hardly any deals for the past three years, there were likely to be a few deals in the "middle ground of very good-sized tenanted pubs" doing between £70,000 to £90,000 EBITDA per annum.

He said that since 1997 there have been three periods of deals activity, with private equity getting involved early in the pub trade with companies such as Pubmaster and Avebury Taverns.

However, when the trade and property investors entered the market they were able to pay higher multiples for assets. He revealed that private equity paid an average of six to eight times EBITDA for pubs, while trade deals pushed multiples up to eight times and, at the property peak, multiples hit 12 times.

Addressing the Publican's Morning Advertiser's Tenanted Pub Company Summit last week, he said: "Private equity has a good track record. A lot of private equity firms that remember what the industry was like 10 to 15 years ago are thinking: 'Is this the right time to get back in the market?'" He said private equity would be attracted by the ability of pubs to throw off cash to repay debt.

"This isn't going to be like the property boom, he said. "This is a very different market, with higher quality assets coming to the market and, in general, more conservative levels of gearing. The quality of assets has improved enormously — the highest at least for the past 10 years."

He said there was also an opportunity for people to acquire between 500 and 1,000 tenanted pubs as pubcos down-size their estates.