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The food and beverage investment banking coverage group has proved attractive for investors in recent years. Changing demographics, shifting consumer habits, and household income are some of the key drivers for the food and beverage sector — and investment banks have taken note. Higher income levels and longer lifespans have lead to a greater interest in healthful and nutritious foods. More people working (often longer hours) means an uptick in QSR, fast-casual, and meal kit consumption. Perhaps it’s no surprise, then, that we’re seeing investment interest in the same sectors as a result. And for now, investor appetite for the restaurant industry shows no sign of being sated.
Investment banks have been involved in a number of high-profile restaurant deals as of late. For instance, JPMorgan Securities served as financial adviser on the April 2017 sale of Bob Evans Restaurants to Golden Gate Capital (UBS Investment Bank served as financial advisor to Golden Gate Capital.) When Restaurant Brands International announced in February that it would buy Popeye’s in a $1.8 billion deal, the company financed the transaction, in part, with financing commitment from JPMorgan Chase and Wells Fargo.
Here is a roundup of some global restaurant investment banks, along with a summary of how investment bank revenues stack up around the globe.
INVESTMENT BANK REVENUES AROUND THE GLOBE
Almost half of investment banking revenue is generated in the US ($22.5 billion, as of August 2017). In comparison, European revenue is 46% as much. Despite being the largest market, the US only has the third largest growth, lagging behind Japan and Latin America.
Globally, investment banking revenues are evenly distributed among four products: equity capital markets, syndicated lending, debt capital markets, and mergers and acquisitions (M&A). Fees from equity capital markets (i.e. assistance in IPOs and follow-on offerings) account for 23% of revenue, with the top player being JPMorgan Chase. M&A advisory accounts for 30% of revenue (Goldman Sachs is the leader in this segment).
A ROUNDUP OF TOP GLOBAL RESTAURANT INVESTMENT BANKS
India Brook Partners is a leading independent investment banking firm established in 2003, specializing in the food and beverage industry. The company served as a buy-side advisor for the acquisition of Million’s Baking Company by affiliates of Red Diamond Capital and regularly represents industry/strategic buyers, financial buyers and institutional investors in connection with investments and acquisitions in the F&B industry.
Bank of America Merrill Lynch
Following the 2008 US financial crisis, Merrill Lynch was taken over by Bank of America. Today, the entity offers mortgage, trading, brokerage, and credit card services, as well as investment banking. It currently operates in 40 countries across the globe.
In its investment banking business, Credit Suisse offers securities products and financial advisory services to corporations, governments, and institutional investors. The Swiss multinational financial services holding company is headquartered in Zürich, with regional offices around the globe.
Based in Germany and listed on the XETRA stock exchange, Deutsche Bank is one of largest financial services firms in Europe and has operations in 71 countries. The firm specializes in the cross border payments, international trade financing, cash management, card services, mortgage, insurance and the usual investment banking streams.
The Peakstone Group is an investment bank that specializes in mergers and acquisitions advisory and capital raising for middle market clients. The company served as an M&A advisor for PepperJax Grill with its sale to TA Associates, assisting in negotiating and structuring critical contracts and leases associated with the transaction.
Another Swiss investment firm founded and headquartered in Zurich (like Credit Suisse), UBS has more than 60,000 employees across the globe (the majority in the US and Switzerland) and specializes in services to high net worth and ultra-high net worth individuals, in addition to the investment banking, private, and retail banking streams.
Since its founding in 1865 (when it was launched to finance trade between Asia and the West) HSBC has grown to become one of the world’s largest banking and financial services organizations with roughly 38 million customers worldwide. The company has been pushing hard to become Europe’s top investment bank, hiring former Goldman Sachs banker Matthew Western as the head of its Global Banking division in May 2016.
Trinity is an independent investment banking boutique focusing on clients that span the gamut, from family run businesses to large corporations and industry focused investors. Its advisory services include buying and selling private businesses, raising equity and debt capital, restructuring troubled companies, consulting and generating business valuation opinions. F&B is of particular focus to the firm, which served as an advisor to California chain Mother’s Market & Kitchen in the recapitalization of its seven units. The firm has assisted in a number of other transactions regarding processed food companies.
Operating in 60 countries with more than 260,000 employees,JPMorgan offers investment banking, as well as small business finance, international banking, transaction processing and private equity services. JPMorgan Securities served as financial adviser on the sale of Bob Evans Restaurants.
Morgan Stanley was founded in 1935 and employs some 55,000 employees spread across multiple countries. The New York-based firm offers investment banking services, as well as M&A, prime brokerage, custodian, settlement and clearing services.
CITI’s investment banking unit provides comprehensive financial advisory and capital raising services to corporations, financial institutions and governments worldwide. The firm performs strategic advisory services on a wide range of M&A transactions and capital-raising activities including mergers, acquisitions, divestitures, financial restructurings, underwriting and distributing equity, debt, and derivative securities.
One of the oldest banking firms, the New York-headquartered Goldman Sachs was founded in 1869 and offers services spread across four divisions: investment banking, institutional client services, investing and lending, and investment management.
Barclays’ Investment Bank provides financial advisory, capital raising, financing and risk management services to corporations, governments and financial institutions worldwide. The company was founded in 1896, is based in the UK, and boasts about 139,600 employees globally. Along with investment banking, Barclays has a strong presence in retail and commercial banking.
Since its founding more than a decade ago, The Spartan Group has advised on over $1 billion of transactions. Headquartered in Los Angeles and with offices in San Francisco, the firm says it operates “in regions where trends are set and business concepts and technologies are created that drive future economic expansion.” The company has advised a number of food and beverage companies on past transactions, including performing strategic advisory for Noah’s Bagels, and representing Luka Juice on its merger with Jamba Juice.
CCC Investment Banking
CCC is Canada’s leading national, independent, mid-market investment banking firm, serving clients from its offices in Toronto and Vancouver. The firm acted as exclusive financial advisor to Wing’s Foods Products when it was acquired by
Ventura Foods, LLC.
TDR Capital has been the most prolific investor in the industry over that same span, completing nine transactions, followed by the Business Growth Fund, with seven.
This boutique investment banking firm has locations throughout the Midwest US. Amherst is completely independent and aims to serve the middle-market transaction needs of clients. The firm has relationships with a number of restaurant brands, including McDonald’s and Yum!.
THE IMPORTANCE OF RESTAURANT EXPERTISE WHEN IT COMES TO INVESTING IN FOODSERVICE
Investment banks have a few levers for increasing sales, such as opening stores in new markets, increasing labor productivity or food costs, and improving up-sells. Investment banks looking to increase their return on a restaurant chain also often look to capitalize on the success of a particular trend. Of course, distinguishing between trends and fads is a little more challenging, and often requires the help of an outside expert, one who can perform the necessary due diligence to determine how best to increase sales, taking into account macroeconomic research and analysis to allow for an informed investment decision.
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ABOUT AARON ALLEN & ASSOCIATES:
Aaron Allen & Associates is a leading global restaurant industry consultancy specializing in growth strategy, marketing, branding, and commercial due diligence for emerging restaurant chains and prestigious private equity firms. We work alongside senior executives of some of the world’s most successful foodservice and hospitality companies to visualize, plan and implement innovative ideas for leapfrogging the competition. Collectively, our clients post more than $100 billion, span all 6 inhabited continents and 100+ countries, with locations totaling tens of thousands.