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The 2000 Chain Restaurant Merger& Acquisition Census Census Criteria The Census reports change of ownership activity for chain restaurants in the United States. In order to be counted in the Census, a meaningful change of ownership must have been announced. The Census does not include routine trades of restaurant securities on a formal exchange, but does include initial public offerings, subsequent stock offerings, significant investments and, of course, traditional mergers and acquisitions. Restaurant chains qualify for the Census if either the acquirer or the target are headquartered in the United States and have at least four separate foodservice establishments of the same or different concept. Qualifying candidates include quick service, full service and limited service firms. The Census lists those transactions which have been announced during the census year. Some of the transactions may not have been completed. The goal of the Census is to provide restaurant executives with comparative industry information to assist in making major strategic growth decisions. In addition to buyer, seller and target names and locations, the Census obtains the following information:
Because the vast majority of the transactions are private and confidential, purchase price information is normally unavailable. While this information would be useful, some buyers and sellers have been unwilling to share this information for the Census. Information is compared with prior years to assist in identifying trends. The following information summarizes the key statistics of the Census for 1999 and 2000. 2000 Census Overview The Census captured 132 announced transactions, 15% above the 1999 level. Public market transactions (IPOs and secondaries) were about equal to last year, but well below the record 1997 level. Approximately 95% of the activity was recorded in the private market, close to that recorded in 1999. TYPE OF BUYER It was no surprise that operators acquiring an unrelated or new concept continued to lead the Census. Six IPOs were recorded and one company filed for a secondary offering. Franchisees continued to acquire units in their own system as well as diversifying by acquiring franchisees in other systems. With the financial markets quite strong during the first half of the year, equity funds and management groups were able to find financing to continue their acquisition objectives.
TYPE OF DEAL In 82% of the private transactions, sellers insisted upon payment in cash, up slightly from 1999. 42% of the non-public market transaction sellers chose to sell stock rather than assets, reversing the decline from prior years. Several of the stock sales involved public companies going private.
REASON FOR THE SALE With a decline in restaurant values beginning to surface in the latter half of the year, six publicly held companies went private, up significantly from the last two years. Companies in financial trouble put themselves on the block and were able to find buyers at acceptabl prices. Public offerings listed expansion of the chain’s concept followed by a reduction of debt as the major reasons for the sale of their stock.
INDUSTRY SEGMENT The family/coffee shop segment lead the Census for the first time in many years. Midscale restaurants continued to attract buyers as many of the companies taken private were in this category. The burger segment again saw many more transactions this year than in the past two years. Full service concepts increased their share of the number of transactions captured; however, over 50% of all transactions were in QSR.
REASON FOR THE PURCHASE Diversification remains the most frequent reason given by buyers in searching for a new concept. Because of lower values in the latter half of the year, many shareholders chose to buy other shareholders’ interest. A horizontal integration strategy prompted many franchisees and contract feeders to expand their territories with proven concepts.
GEOGRAPHICAL REGION OF TARGET COMPANY Foreign buyers were unsuccessful in purchasing domestic restaurant chains, a sharp departure from 1999. The Southern region once again lead all other regions followed by the West.
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