Newspaper article The Evening Standard (London, England)

Why Venture Capitalists Dine out on Brands; Business

Newspaper article The Evening Standard (London, England)

Why Venture Capitalists Dine out on Brands; Business

Article excerpt


AS YOU read this, are you sipping a cup of Typhoo tea? On your way to Holmes Place to burn off the lunchtime Burger King?

Whatever you're doing, the chances are it will involve a famous brand owned by a venture capitalist. In all walks of life, from the PizzaExpress on your High Street, to the Bloo disinfectant in your loo, famous brands have been taken over by financial wizards in discreet West End and City offices.

On the Takeover Panel's deal list, no fewer than four of the seven brands are in the sights of VCs. Thorntons, New Look, Clubhaus and Ask Central are all being stalked by private equity firms. On a bigger scale, oldies' insurance and travel group Saga is creating a frenzy of interest among financial bidders.

So why do buyout specialists take such an interest in leading brands?

One senior corporate finance " rainmaker" offers a cynical view: "The private equity boys move from one industry to another all the time when they're looking at potential deals. So, it's far easier for introducers like us to get them interested in a business they've already heard of than to sell them the concept of an obscure widget maker."

The VCs, however, claim deeper reasons lie behind their appetites.

Adrian Johnson's L&G Ventures lists Jeyes Fluid, Warner Cinemas and Butlins in its portfolio, and has made good returns by selling-on previous investments such as Golden Wonder crisps.

He says branded businesses offer strong and stable future revenue - crucial for winning approval from banks for the type of loans that buyouts need.

"By their very nature, brands have some history and quality behind them," says Johnson.

"They tend to be good cashflow generators. A brand with a loyal following is an attractive asset, because you can generally make the assumption that its performance is going to continue."

Moreover, branded businesses tend to weather global economic storms better than others. Research shows that when consumers feel the pinch they buy tried and tested products such as a Gillette Mach 3 razor or can of Coca-Cola, not lesser-known alternatives. …

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