Gorka García, from Corpfin Capital, stated today, during his speech at the 5th Alimarket Organised Restaurant Meeting, that private equity “can be a very complementary partner” for restaurant companies in which it invests. Corpfin Capital has controlled the majority of the capital of Rosendo Milá, owner of the bakery coffee chain El Fornet, since the end of 2014 El Fornet.
Among the contributions that private equity can make to a company in this sector, García highlighted that, beyond the obvious one of capital, it can greatly help in operational matters: strengthening management teams, improving reporting systems and discipline in decision-making, refining the economic model of the concept, supporting the design and execution of the expansion plan and promoting corporate transactions that make sense (with complementary brands that generate cost synergies).
Gorka García, partner at Corpfin Capital – Alimarket
The executive emphasised that there is currently a high level of activity in private equity investment in restaurant companies. “Every day or week there are news about fund entries, both in emerging concepts where investors come in to support their development and in leading companies where large international groups take positions,” he explained. In addition, these transactions are being carried out at high valuations with an upward trend.
“We are temporary investors, for four to six years, but I believe that the restaurant sector is very dynamic and will continue to offer long-term investment opportunities for funds like ours.” Since 2005, Corpfin Capital has closely followed the restaurant sector and has analysed more than 30 projects. The fact that it has only invested in two—Rosendo Milá and Restauravia—is because it looks for “leading concepts with strong growth potential”. In other cases, other private equity firms have ultimately completed the transactions.
Attraction factors
The strong attractiveness of the restaurant sector in Spain as an investment destination is based on the fact that it has been growing since the end of the crisis, although it is still far from 2007 levels, which leaves room for further growth. In addition, it is still a highly fragmented market, with a strong presence of independent restaurants and relatively limited weight of large groups within organised restaurant chains.
Furthermore, the macroeconomic situation in the country is positive and stable, meaning that foreign companies are planning to increase their investments. “Spain is in fashion, although the Catalan situation has slowed that enthusiasm,” García added. Another relevant factor is the existence of high global liquidity, which drives investment into real assets that generate strong returns. In fact, “there are more than €4 billion in private equity funds aimed at investing in the Spanish market,” he warned.
All of this is reinforced by the fact that the restaurant sector has produced many success stories in recent years, both in Spain and internationally, making it increasingly considered as an investment target. In this context, large international groups consider entering Spain in many cases as a gateway to Europe.
The analysis carried out by a private equity firm to determine whether to invest in a restaurant company involves assessing “whether there is a concept”, first understanding the profitability of each unit and then its growth potential, that is, determining how many units the concept can scale to. In some cases, franchising can be an added factor. In that case, it is necessary to determine whether the concept has sufficient margins to generate profitability for both parties and whether the franchise model can truly compensate the franchisee.
Entry into the bakery coffee segment
Corpfin Capital has controlled Rosendo Milá since the end of 2014, a family business that had “a fairly unique model, combining in-store experience with high-quality products, but practically no management structure,” García revealed. The decision to invest in this company was made because “the concept fit very well and the returns were very attractive”. In a transaction of this kind, for Corpfin it is important to respect the creativity of the acquired companies and to ensure coexistence between the existing management team and new hires.
The new owner has designed and supported an expansion plan in Barcelona, the original market, and also in Madrid, through the El Horno brand, and has strengthened the management team in the areas of general management, finance, marketing, purchasing, HR and expansion. It has also developed new initiatives to adapt and improve the commercial offering, optimised operations by centralising the purchasing department and working capital management, and implemented a new IT and control system.
The achievements since 2014 to date include around ten new openings per year, with 28 stores launched since 2015. It has created 250 jobs, doubling the workforce. Total sales have grown by 58% in three years, while retail sales have doubled.
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Corpfin Capital y el capital riesgo – Alimarket.es
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