Merger and acquisition activity ‘leapt into overdrive’ in 2019
In its survey of pub prices, director Simon Hall said: “The licensed property market is as diverse as it is dynamic, resilient as it is creative and it is always capable of springing a surprise or two.”
Six deals accounted for around 7,400 sales in 2019, with Hall describing merger and acquisition activity in the pub sector as having “leapt into overdrive” despite uncertain economic forecasts.
Stonegate was highlighted as the most active purchaser, having bought sites from Fever Bars and Novus in addition to its £2.97bn purchase of Ei Group’s 4,000-strong estate.
Hall added: “There are no signs that M&A activity will stop in 2020. We expect further rationalisation and consolidation of the managed pub market. Package disposals from the national branded operators will provide the next round of opportunities.”
Both Greene King and Stonegate are expected to sell packages of tenanted pubs in the second half of the year as they complete estate reviews.
Structured growth
Hall said: “Overseas investment into well-operated and established companies still looks attractive and takeover deals for listed companies should not be discounted.
“Operators will focus on structured growth as the sub markets consolidate.”
The specialist said there were encouraging signs that there will be a return of acquisition-focused pub companies (managed and tenanted) seeking individual freehouse operations this year.
It said a rise in demand would drive activity in the freehouse mid market and revive it from a slump it has been in for several years.
This comes as the specialist noted the average freehold sale price has increased to £589,262 – up by 32% from last year.
The overall average leasehold sale price in 2019 was £51,500, an increase of 35% on the previous year, with the average price in the north dipping by 5% to £31,000 while the average in the south rose by 27% to £63,000.
Sound investment
The report predicted an increase in the availability of franchise agreements and free-of-tie leases, and that tied tenancy deals would continue to be offered on better, more flexible terms.
Hall said: “The pub market is not struggling. The significant benefits of asset-backed cash flow has attracted new overseas investors, established investment funds and existing trade buyers.
“They have all drawn the conclusion that the pub market offers sound investment fundamentals.
“We may face a few headwinds, but the pub market, in all its exciting forms, has a great future; £8bn says it has.”
