Understanding and Maximizing the Value of Your Business for Investment or Sale. Presented on at:

Transcription

1 Understanding and Maximizing the Value of Your Business for Investment or Sale Presented on at:

2 Jim Parish 43 years experience buying, building and arranging transactions for companies in restaurant, hospitality, services, energy, distribution and commodity processing industries Significant involvement in more than 75 restaurant brands, involving numerous capital market and strategic/ investment transactions Board work, management development, mentoring, advisor to strategic and financial buyers and sellers President of Parish Partners, Inc. 2

3 Damon Chandik Managing Director and Head of the Restaurant Group at Piper Jaffray Focused on providing investment banking and mergers and acquisitions advisory services to restaurant companies Has more than 15 years of investment banking experience, including public equity and debt offerings, private capital raising, mergers, acquisitions, leveraged buyouts and recapitalizations Prior to joining Piper Jaffray in 2003, Damon worked at Montgomery Securities and Thomas Weisel Partners Before beginning his banking career, Damon worked in management and operations for Fresh Choice Restaurants Select recent transaction experience includes: M&A advisor to Macaroni Grill on sale to Ignite Restaurant Group M&A advisor to So. Cal Pizza on sale to Sterling Investment Partners Bookrun equity underwriter on Del Frisco s Restaurant Group s IPO Bookrun equity underwriter on Ignite Restaurant Group s IPO M&A advisor to The Krystal Company on sale to Argonne Capital M&A advisor to Barteca Holdings on sale to Rosser Capital Partners M&A advisor to McCormick & Schmick s on sale to Landry s 3

4 Greg Dollarhyde Successful, multi-decade restaurant industry veteran Executive Chairman or CEO of eight separate restaurant companies and CFO of two publicly-held restaurants companies Executive Chairman and Former CEO, Zoe s Kitchen (fast-casual restaurant chain based in Dallas, TX) Former Executive Chairman, Pacific Island Restaurants (Yum! franchisee with Pizza Hut and Taco Bell locations in Hawaii and Guam) Former CEO, Fresh Enterprises (holding company of Baja Fresh, a rapid growth, fast-casual Mexican food chain) Purchased the company in1998 and, after accelerated growth, sold the company to Wendy s in 2002 for $275 million Current CEO of The Veggie Grill, a rapidly growing chain of premium, fast-casual restaurants based in Santa Monica, CA 4

5 Pierre LeComte Managing Director at TSG Consumer Partners Responsible for originating and conducting diligence on new investment opportunities, structuring transactions, and working with TSG's partner companies Was responsible for managing TSG's investment in Yard House Restaurants, with a successful sale of the company to Darden Restaurants in August 2012 for $585 million Former Manager with Bain & Company Consultants Led investment diligence teams in the private equity practice and worked across consumer goods sectors including food, household products and durables Prior to joining Bain, Pierre worked in brand management with Yahoo and the Nabisco Biscuit Company Holds a BS in Economics from the Wharton School at the University of Pennsylvania and an MBA from the Kellogg Graduate School of Management at Northwestern University 5

6 M&A Case Study: Yard House Yard House is a polished casual restaurant chain known for its large selection of draft beers, high quality menu of American fare, and energetic music-driven atmosphere TSG Consumer Partners invested behind Yard House and its founders in 2007 Significant value creation achieved by: Strategic growth plan focused on developing concept in new markets, even during recession Unit Count State Count Real estate strategy focused on high volume, multi-daypart locations Maintenance of best-in-class unit economics Optimization of supply chain and procurement In 2012, TSG and management sold Yard House to Darden Restaurants for $585 million Transaction Transaction Transaction Transaction 6

7 Baja Fresh Turbocharged Baja Fresh is a Mexican restaurant chain that combines fast-casual and casual dining quality and freshness with QSR prices and convenience Greg D. formed an investment group, including Catterton Partners and Oak Investment Partners, and acquired Baja Fresh in 1998 for $27 million Major immediate upside was: Supply chain Menu pricing Labor management Franchise leadership 7

8 Baja Fresh Turbocharged Emphasis over the 4-year holding period: Build company-owned locations: ~48 restaurants at closing were 75% franchised Broaden menu while maintaining freshness Build the operations culture, which was ~85% Hispanic Successful openings in new markets hometown LA had the third highest AUV s Prove up national rollout capability In June 2002, Wendy s International acquired the company for $275 million $11.4 million run-rate EBITDA (~26x) Aggressive price paid by Wendy s to compete with McDonalds purchase of Chipotle, and to show growth for Wendy s system Lessons are the same today a motivated buyer, a high quality product & a scarcity of tradable assets can result in outsized valuations 8

9 Baja Fresh Turbocharged Baja Fresh was well-positioned due to: Category leader in fresh, savory grilled Mexican food Brand had high word-of-mouth awareness and a loyal customer following in its trade areas Unique concept positioning early leader in the sweet spot between casual theme Mexican and QSR Was fast-casual before category was named Powerful unit growth story and exceptional performance of new stores at time of initial sale to Wendy s Experienced management team Revenue & EBITDA at 2002 Sale $ in millions $90 $60 $30 $ $80 Revenue $11 Run Rate EBITDA Unit Count Growth (1) Transaction 2002 Transaction (1) Unit count grew to 282 in

10 Case Study: Veggie Grill Veggie Grill is a chain of fast casual vegetarian restaurants Menu is 100% plant-based; convenient, affordable and craveable Veggie Grill intends to change the way people eat, think and talk about vegetarian food Key Stats: 17 restaurants in CA, OR and WA +16% same store sales in 2012 Revenue running at 80%+ Plans to more than double restaurant base in next 18 months, with new locations opening in Los Angeles, Orange County, San Diego and Seattle during the first half of

11 Case Study: Veggie Grill Significant value creation achieved by: Unique 100% plant-based food menu caters to an increasingly health conscious, mindful consumer High AUVs and solid box economics Accelerating store count growth and increasing same store sales Proven success in West coast markets Passionate management team Veggie Grill recently completed a $20 million new equity raise from private investors and Brentwood Associates Represents fourth round of equity funding Investors see big option value for the space 11

12 Successful M&A Transactions Company Acquired by Catterton Partners in 2010 McDonald s invested a minority stake in 1998 Acquired by BRS & Castle Harlan in 2006 Acquired by Catterton Partners & Oak in 2006 Acquired by Lee Equity Partners in 2010 Characteristics Highly appealing concept, unique menu offerings and fast casual plus guest experience Disciplined growth strategy with strong performance across existing, emerging and new markets Highly experienced management team with passion for brand Highly differentiated concept with national potential Best-in-class unit economics Fast paced national store roll-out High quality execution despite aggressive growth Successful management team Category defining brands in upscale casual Italian segment Company with the scale, profitability, infrastructure and historical growth National growth prospects with strong unit level economics Management depth and experience Differentiated platform high-quality, made-from-scratch food in a polished atmosphere with personalized service at uncommonly low, non-promotional price Successful 30-year history Significant white space opportunity in new and existing markets Differentiated take and bake concept Success in various economic conditions, including recessionary environment Strong free cash flow with all franchised model 12

13 Challenged M&A Transactions Company Acquired by Buffets in 2006 Acquired by Leonard Green in 2005 Characteristics Potentially highly synergistic acquisition failed to create value Leverage utilized to fund acquisition left minimal financial flexibility Family dining segment facing significant long-term headwinds Negatively impacted by recessionary environment and leverage from LBO Slow to implement cost savings initiatives Significant growth in non-core markets with limited success Acquired by Bob Evans in 2004 Declining unit economics Perception of diminished guest experience 13

14 Factors Leading to Long Term Success Primary Factors Highly differentiated concept Compelling and sustainable unit economic model Large addressable market opportunity, with proof of portability beyond core markets Supporting Factors First-mover advantage and/or defensible moats around business Proven growth even during periods of challenging economic environments Sustained operating margin expansion with ability to leverage fixed costs Ability to generate strong loyalty through superior and consistent guest experience Sustained traffic / transaction growth relative to peers Strong management team 14

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