KPMG predicts surge in smaller M&A activity

There will be a “surge” in merger and acquisition activity among small and medium sized hospitality businesses in the second half of 2009 after a slow start to the year, KPMG has predicted.

Richard Hathaway, head of travel, leisure and tourism at the consultancy, said deals in the sector will remain “largely frozen” in the early part of the year, with potential buyers wary of overpaying for assets

But later in the year, while large deals will remain unlikely due to funding constraints, those with the necessary cash reserves for smaller investments will be keeping out a watchful eye for bargains, which will become more plentiful as distress increases and selling assets becomes imperative for survival, he added.

“The hotel sector is likely to see an increase in deals as the stronger budget and luxury hotel brands seize the opportunity to snap up assets from their mid-market counterparts, which have felt the squeeze from reductions in business travel and leisure spend much more acutely,” Hathaway said.

“For pubs, bars and restaurants it is a mixed outlook,” he added. “The pubs and bars are already suffering from a combination of pressures and restaurants will feel the pinch as the economic downturn continues, making them seemingly unlikely targets for investment, but the stronger brands will remain attractive from a buyers’ point of view.”

UK hospitality M&A activity slows down >>

UK hotel property prices could fall by as much as 20% >>

Premier Inn owner Whitbread ends merger talks with rival Travelodge >>

Punch Taverns rules itself out of Mitchells & Butlers acquisition >>

2008 - Hospitality news review of the year >>

By Daniel Thomas

E-mail your comments to Daniel Thomashere.