Exit music – what do you need to know when it’s time to go?

Drawing on their experiences of acquisitions within the hospitality business, Be At One co-founder Rhys Oldfield; senior vice-president of Alix Partners Craig Rachel; and Richard Barley, former financial director of New World Trading Company; discussed what operators need to be aware of when they make the decision to sell up. 

Be At One sold to Stonegate pub company​

As reported by The Morning Advertiser ​on 23 July, Stonegate Pub Company agreed the acquisition of Be At One​ alongside the purchase of 15 London venues from Novus Leisure. 

Established in 1998 with the opening of its first bar in Battersea Rise in London, Be At One grew into one of the country’s largest cocktail bar operators boasting 33 city centre sites, 17 of which were in London. 

Discussing the sale of the company to Stonegate, Oldfield, who co-founded Be At One with Steve Locke and Leigh Miller, told guests at MA500 Manchester: “We did the right thing, we all love the business” 

“We didn’t have a huge plan when we started, it was about having fun and creating a bar we wanted to drink in.

“We bought an Indian restaurant in Battersea. It was only when we got to site four or five we started to think we have something we can sell.

Oldfield explained that private equity group Piper​ acquiring a stake in the business effectively set Be At One’s eventual sale to Stonegate into motion, with an initial deal a year earlier held up by the referendum on EU Membership in June 2016 before Stonegate came back to the table after seeing that the vote had ultimately changed very little. 

“They couldn’t criticise what we were doing and how we were doing it,” he explained. “We managed to get a better price and do the deal fairly quickly.”

PE acquires NWTC​

As reported by The Morning Advertiser ​in June 2016, Graphite Capital, the private equity backer of Hawksmoor and Corbin & King, acquired the New World Trading Company (NWTC) in a £50m deal​.

The company’s former financial director Richard Barley, who became CFO a year before the buyout took place, explained that after initially investing in NWTC when it had just three sites, the company’s growth exceeded expectations and ultimately sped up deal.

“Chris Hill stepped up to CEO and I stepped up to CFO so we had a management team looking to propel the business forwards over the next five years. Everyone knew what everyone wanted from the transaction.”

Live and die by data ​

Craig Rachel of Alix Partners, which advised on NWTC’s deal with Graphite, explained that anyone looking to engineer a sale needs to have extensive company information and data ready for investors.  

“If an investor is looking at the business, while they can understand the concept, ultimately, they live and die by data,” he said. “Whatever your aspirations are for the business you need to have data to back that up. How can you shape the business plan over time to make it more investable?”

Oldfield added: “Don’t underestimate the due diligence – it’s War & Peace​ and then some. You’ve got to be clear, you’ve got to be able to prove what you say, back it up. Keep doing what you’re doing and don’t be distracted by the process.”

Moreover, referring to his experience with the NWTC, Barley explained: “When I pulled the business plan together for NWTC, I had business objectives going back to day dot. You don’t want any surprises, if you hit any surprises, it will affect value.”  

Agree on objectives​

Moreover, Rachel added that it’s essential everyone involved in a sale is singing from the same hymn sheet. “Agree the objectives at the outset,” he said. “For some individuals it may be getting the highest price possible, for others it may be getting the right partner or getting a deal done within a certain time-frame. Then you can structure the process of an exit around that.”

Dealing with private equity​

Rachel described private equity money coming into the business as the starting of a “ticking clock” towards eventual sale. “Different funds will have different approaches,” he explained. “Some will be more applicable to others. Some will be very hands-on.” 

However, Oldfield added that provided a business is performing as planned, those behind a private investment, from his experience, will take a more hands-off approach.

“In the first year we struggled with the plan then in the third year we overtook the plan,” he said. “The private equity guys are pretty good, if you meet expectations they’ll leave you alone, but the clock is ticking. There is pressure from them but they do understand.”