SAZUN BLOG
diciembre 7, 2021

Industry Insight Hospitality – 2nd Edition

«Welcome to our Industry Insight, giving you a birds-eye view on the most recent developments concerning the Hospitality market, especially the foodservice and QSR segments. The market for foodservice is governed by innovative business models, delivery and industrialized business model concepts. In terms of public valuation multiples, we see that a market relaxation is in process, allowing for opportunities to enter the market. Overall 2021 saw a great amount of M&A activity.»

 

 

Emanuel Müller
Managing Partner

 

Market Insights
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Market Overview

Global market for Foodservice
2019 by type of restaurant and geography in EUR b

 

Online Food Delivery
in EUR m 2021-2025

  • The Foodservice market amounts around EUR 2.600 b in 2019, with APAC taking up 45 % of the global market share. North America and Europe signalize similar sizes, but the distribution is differing. Whilst in the US, Quick Service Restaurants (QSR) have the highest popularity, the European market is yet still more differentiated across different Café & Bar concepts, Full Service Restaurants and ultimately QSR. Because of an increase in international incumbents, we expect a shift towards the QSR business in Europe.
  • The market for Online Food Delivery is expected to increase at a CAGR of 10.39% until 2025. Especially, the greater degree of customer-affinity to online delivery, fostered by the pandemic, causes this trend.
  • In 2021 we experience China as, by far, the largest market in terms of generated revenue in the online food delivery sector – the approximate coverage adds up to almost 60%.

Sources: Sources: Statista (2021), Deloitte Food Service Monitor (2020)
Note: Revenue is calculated according to the value of orders pursued either online via restaurants or via platforms – it is not an indication for total market player revenue

 

Market Details & Industry Segments – Food Delivery

Development of Transaction Multiples
Nov.19 – Nov.21 by deals in the US, Europe and Asia

 

 

  • We analyzed a total of 107 transactions, among which 34% provided indications for multiples.
  • Q2 2020 saw a sharp drop of -53% in valuations which we argue was reasoned through the waves of uncertainty caused by the covid-19 pandemic.

 

  • The recorded revenue multiples lie within a median range of 1.1x and 2.7x, where again the bottom line was caused by the impacts of the covid-19 pandemic.
  • Currently we are experiencing a peak in ebitda multiples, which is primarily reasoned through the high share of ongoing M&A activity in the sector. Within the median of the last 24 months, multiples increased by around +54% reaching a current median EV/EBITDA of 16.8x.
  • It must be noted that, at the moment, multiples across all industries are out of bound

 

 Sources: Mergermarket (2021), BDO (2021)

Observed Trends


The pandemic changed the consumer behavior drastically. More than 80% of inquired expect cleanliness, a personal control of cleaning as well as visibility in cleaning practices among the key virtues stores and restaurants must prove. Post-pandemic an increase of 14% in delivery and takeaway preferences from restaurants was recorded.

Digitalization in the sector for QSR has become imperative. According to consumer preferences, 58% prefer to order digitally from a QSR provider. Around the same percentage of inquired, have a third-party delivery provider installed on their phones.


Among QSR, one of the most important factors for success is seen within the creation of industrialized concepts, governing the full value chain. By a full governance, QSR businesses can leverage from a greater profitability and keep more flexibility. Additionally, QSR are seen to be streamlining their menus, to more easily mitigate the unpredictability caused by shutdowns and disruptions across the supply chain.

The great number of disruptions in the sector, allows for a variety of innovative business models in the QSR segment. Concepts like Menu Engineering, allowing custom-built menus for consumers, Cloud Kitchens, leveraging the strength of delivery providers or Brand Spinoffs are only a few amongst new QSR concepts that we see on the rise.

 


M&A activity in the QSR sector has reached an all-time high in 2021, with transaction multiples and deal numbers detaching from the previous norms. However, whilst revenues in the sector grew, it is questionable whether the companies may keep up the growth in 2022 – especially given the risen operational costs. On the other hand, the winners of the crisis may keep up the wave of initiated consolidation in the sector and seek out new opportunities with a stable supply chain and innovative business models.

Sources: Deloitte (2021), McKinsey (2020; 2021)

Valuation Trends and Developments – QSR

EV/SALES(Next 12 Months)

 

 

EV/EBITDA(Next 12 Months)

  • After the experienced rally, valuation multiples are relaxing back towards the median in the QSR sector. In comparison we expect a stable EV/SALES because of the sharp growth in the top-line of companies combined with increased customer preferences.
  • EV/EBITDA displays a similar picture, however with a drop below the median valuation of 15.1x across the past 2 years. We reason that a variety of supply-chain-related issues have impacted the cash flow management for publicly listed companies, whose valuations now witnessed a drop.

Source: Sazun Equity Research, Hospitality-QSR (2021)


Key Performance Indicators

 

Peer Group Analysis

Selected Latest Deals with a focus on QSR

Want to know more?
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If you would like to learn more about the valuations and deals of your industry, the transaction mentioned above, or generally our way of working, we would certainly be happy to demonstrate our m&a PLUS® principle in a confidential meeting. Of course, we also offer detailed overviews of the vending machines business, bakeries, and travel platforms, where we have strong credentials.
Just get in touch and we will share our experience on how to grow businesses with long-lasting partnerships.

With passion for M&A,
Your SAZUN Team