Investors’ appetite for the leisure sector has never been greater and this has been highlighted by the recent surge in M&A activity.
In the last two weeks alone we have seen Encore Capital purchasing Health Club groups 37 Degrees and The Third Space, Luminar Group acquiring Chicago Leisure and Jon Moulton’s Better Capital acquiring Intertain. So what is driving this rise in activity?
The deals bear little relation to one another. The health club sector is very much in vogue and London clubs are performing very well. Encore have long owned one of London’s biggest health clubs The Reebok Club at Canary Wharf and are taking advantage of private equity funds looking to exit businesses they have long owned.
The late night sector is suddenly highly desirable and both Better Capital and Luminar’s shareholders are hoping to benefit from an emergence of the sector after a long period of distress.
A rise in the number of institutions looking to increase their exposure to leisure has resulted in a significant amount of new funding becoming available. Coupled with the strength and resilience of the leisure sector, this is presenting a unique opening for investors and together they are driving interest in both businesses and property.
This demand is not just felt in London where the market’s strength is widely reported. We have seen an increase in demand in the provinces particularly for leisure parks, restaurants and public houses, where savvy investors understand the potential these areas present as well as the less ‘premium’ price point.
It will be interesting to see whether this increase in activity has an effect on values, particularly property prices. However, given the number of disappointed buyers, this rise in demand only looks set to continue well into the foreseeable future.
Mark Sheehan is managing director of Coffer Corporate Leisure.