Latest deals are good news for wider sector

24-Jun-2014 - Last updated on 25-Jun-2014 at 10:45 GMT

Neil Morgan: "Even better news for the market is the apparent willingness of the major banks to get involved in meaty pub transactions"

Phew! It’s good to draw breath after the recent flurry of deal activity in the pub sector. It hasn’t been this active on the major transactional front since pre-recession — and there’s no indication that it’s about to slow down either.

But while big transactions — like those that recently involved Orchid being acquired by Mitchells & Butlers; MxB Partners acquisition of Amber Taverns; and Hawthorn Leisure (backed by Avenue Capital and May Capital) taking 275 tenanted and leased Greene King pubs — are good news in terms of signalling a refreshed top-end of the pub sector, what do they really mean for the regional pub group or the individual, average publican?

The temptation for the stand-alone or small regional group operator would be to think ‘not much’ — but as a stimulus to the pub market generally, there is much to be said for major group deals like those we’ve seen in the last month or so.

And this frenetic end to the relative stagnation of the past few years comes with additional signs that offer encouragement to the wider sector.

Growth

First, the role of private equity in the recent activity could see these players opt to continue with growth strategies that will see them on the lookout for good, mid-market opportunities in the regions — good news for anyone looking to sell.

Conversely, the nature of deals involving the transfer of a large number of pubs may result in some being placed on the market as being not integral to the new investors’ strategy. And in a sector that has been reliant on disposals from administrations to bring any great quantity (or reasonable quality) of pubs to the market, that has to be good news too.

Green light

Even better news for the market is the apparent willingness of the major banks to get involved in meaty pub transactions. Having consolidated their ‘bad bank’ activity, perhaps they once again value the currency of a revived pub sector.

For the regional, small and stand-alone operator especially, this may be the statement of intent they’ve been seeking for many a long year — as once the corporate banks demonstrate an inclination to lend for transactions and refurbishments, so too may local bank branches be given the green light to lend to the pub sector.

So, from a couple of major deals we could see the re-emergence of a pub market last seen in 2007.

I know it is common for us agents to always accentuate the positives in the pub sector, but from our current view, the ongoing revival in fortunes, both from a trading and transactional perspective, could well be the genuine article.

Neil Morgan is director and head of pubs at Christie+Co