investment banking i industry spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle...
TRANSCRIPT
![Page 1: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/1.jpg)
1
Restaurants I Industry Spotlight
Q1 2018
Restaurants I Q1 2018
Investment Banking I Industry Spotlight
![Page 2: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/2.jpg)
2
Restaurants I Industry Spotlight
Q1 2018 Fifth Third Consumer & Retail Investment Banking
Dedicated Sector Focus
Consumer & Retail Restaurants & Franchising Food, Beverage & Agribusiness
Apparel & Accessories
Broadlines
Convenience Stores
e-Commerce
Grocery & Pharmacy
Hardlines
Specialty Retail
Casual & Family Dining
Coffee & Specialty
Fast Casual
Fine Dining & Polished Casual
Fitness & Wellness
Franchisors & Franchisees
Quick Service Restaurants (QSR)
Agricultural Inputs
Beverage Distributors
Beverage Producers
Food Distribution
Food Retail
Front-Line Processing
Value-Added Manufacturing
Fifth Third’s Consumer & Retail Investment Banking team offers merger & acquisition (M&A), capital raising and other
strategic and financial advisory services to the middle market, corporate clients and financial sponsors
Investment Banking
Financial Advisor
Recapitalization by
March 2018
Charlie Hurt
Managing Director
Atlanta, GA
(404) 279-4518
Red Farha
Vice President
Charlotte, NC
(704) 808-5129
John Shoffner
Managing Director
Charlotte, NC
(704) 688-1813
John Boisture
Director
Charlotte, NC
(704) 688-4522
Financial Advisor
Acquisition by
December 2017
Financial Advisor
Acquisition of
Portfolio Company of
January 2017
Planet Fitness Midwest
Financial Advisor
Investment by
$15,000,000
June 2016
Financial Advisor
Acquisition by
$425,000,000
February 2016
Capital Markets
Craig Wolf
C&R Corporate Banking
Chicago, IL
(312) 704-2994
Jeff Hoffmann
Restaurants Corp. Banking
Chicago, IL
(312) 704-6246
Mike Brothers
Debt Capital Markets
Chicago, IL
(312) 704-7362
Mike Ryan
Equity Capital Markets
Nashville, TN
(615) 687-3123
Joint Lead Arranger
$750,000,000
Senior Credit Facilities
October 2017
Sole Lead Arranger, Sole Bookrunner &
Admin. Agent
$300,000,000
Senior Credit Facilities
July 2017
Joint Bookrunner & Co-Manager
$1,500,000,000
Senior Unsecured Notes
July 2017
Joint Lead Arranger
Portfolio Company of
$4,900,000,000 Credit Facilities
$1,000,000,000 Senior Notes
August 2017
Joint Lead Arranger
$1,500,000,000
Senior Credit Facilities
June 2017
![Page 3: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/3.jpg)
3
Restaurants I Industry Spotlight
Q1 2018
85%
90%
95%
100%
105%
110%
115%
120%
125%
130%
Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18
Consumer & Retail Sector Dashboard
Source: Bloomberg
Equity Returns by Sector (LTM)
Consumer Sentiment
Relative Equity Performance (LTM)
Retail Gas Prices ($/gallon) Case Schiller Index % Δ Disposable Income
34.4%
29.3%
26.2%
14.8%
7.4%
6.0%
2.9%
(10.0%)
(11.2%)
Personal Products
Retail - Multiline
Apparel
Restaurants
Retail - Specialty
Beverage
Retail - Food
Food
Household Products
LTM YTD
S&P 14.8% (0.7%)
Cons. Staples (3.6%) (9.0%)
Cons. Discretionary 19.6% 3.2%
60
65
70
75
80
85
90
95
100
105
Mar
-13
Sep
-13
Mar
-14
Sep
-14
Mar
-15
Sep
-15
Mar
-16
Sep
-16
Mar
-17
Sep
-17
Mar
-18
120
130
140
150
160
170
180
190
200
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
1.50
2.00
2.50
3.00
3.50
4.00
Mar
-13
Sep
-13
Mar
-14
Sep
-14
Mar
-15
Sep
-15
Mar
-16
Sep
-16
Mar
-17
Sep
-17
Mar
-18
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
Feb
-13
Au
g-1
3
Feb
-14
Au
g-1
4
Feb
-15
Au
g-1
5
Feb
-16
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
![Page 4: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/4.jpg)
4
Restaurants I Industry Spotlight
Q1 2018
95%
100%
105%
110%
115%
120%
125%
130%
Feb
-13
Au
g-1
3
Feb
-14
Au
g-1
4
Feb
-15
Au
g-1
5
Feb
-16
Au
g-1
6
Feb
-17
Au
g-1
7
Feb
-18
Apparel Food & BeveragePersonal Care Food ServicesJewelry & Watches
Same Store Sales (SSS) Growth
Consumer Spending as a % of Real GDP
Personal Expenditure – Primary Consumer Segments
Restaurant Sector Insights
Source: S&P Capital IQ, Company Filings, Technomic
Positive Same Store Sales (SSS) Growth Returned in Q4
For the first time in nearly two years, both full and limited service operators generated positive SSS growth in Q4 2017
Comp growth may have troughed during Q3 2017 after nearly two years of downward momentum on sales
Recent momentum in GDP growth, take-home pay and business sentiment have led to a stronger consumer outlook
Restaurant operators are expecting softer SSS growth during Q1 2018
Political Uncertainty Continues to Have an Impact On Restaurants
The Department of Labor introduced two rule changes that may have a positive impact of restaurant operators
– DOL proposed a rule that would allow restaurants to pool tips (subject to a minimum wage threshold)
– Withdrawal of guidance on a joint-employer rule that had introduced significant risk to the franchise business model
• However, the DOL reversed its guidance
The Tax Reform and Jobs Act should benefit operators given the immediate expensing of CapEx and reduced corporate tax rates
Fed interest rate policy may cause a reflationary environment, creating an offset to improved consumer discretionary spending
Labor will prove a significant issue as minimum wage increases are taking effect across the country – technology continues to be viewed as a substitute for labor
Despite Several Headwinds, Consumers Seem Optimistic
The labor market continues to show momentum in wage growth
Unemployment remains low relative to historical levels, and job-seekers are re-entering the market
Retailers experienced their best holiday season in nearly 5 years
A meaningful portion of disposable income from tax reform has historically flowed to restaurants
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017
Full Service Restaurants Limited Service Restaurants
64%
65%
66%
67%
68%
69%
70%
71%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
![Page 5: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/5.jpg)
5
Restaurants I Industry Spotlight
Q1 2018
(10.0%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Full Service Restaurants Limited Service Restaurants S&P 500
10.0x
15.0x
20.0x
25.0x
30.0x
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Full Service Restaurants Limited Service Restaurants S&P 500
Public Equity Market Valuation Trends
5-Year Forward P/E Performance [1] 5-Year Share Price Performance
Sub-Sector Indices’ Share Price Performance [1]
Source: S&P Capital IQ as of March 29th, 2018 * Each index is comprised of the companies noted on page 13 [1] Forward P/E multiples in charts do not match the table, as 5-year performance chart is market capitalization weighted
+68.2%
+55.6%
+63.5%
16.6x
17.9x
22.7x
Median
Number of Enterprise Value Median EV Multiple Median Multiple
Sector/Sub-Sector Companies $ in Millions Revenue EBITDA LTM P/E Revenue EBITDA Forward P/E
Full Service Restaurants 20 $1,278 1.2x 11.0x 21.6x 1.1x 9.3x 19.3x
Casual Dining 11 1,998 1.2x 11.0x 21.6x 1.1x 9.3x 17.9x
Family Dining 6 1,278 1.4x 13.7x 16.1x 1.8x 10.8x 21.5x
Fine Dining & Polished Casual 3 256 0.8x 8.7x 21.6x 0.8x 7.9x 19.3x
Limited Service Restaurants 22 2,967 3.6x 12.9x 20.0x 3.9x 11.5x 23.3x
Coffee & Specialty 3 6,967 3.6x 14.7x 17.4x 5.6x 14.0x 23.3x
Quick Service 7 2,967 4.2x 12.5x 22.5x 3.9x 11.5x 20.6x
Fast Casual 12 365 0.9x 12.9x NA 0.9x 11.4x 34.3x
S&P 500 500 NM 2.5x 12.6x 26.7x 2.3x 10.7x 17.3x
Median TEV/LTM Multiples Median TEV/Forward Multiples
![Page 6: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/6.jpg)
6
Restaurants I Industry Spotlight
Q1 2018
21.9%
27.3%
8.1%
13.3%
10.9%
9.9%
14.8%
13.6%
20.0%
10.0%
13.6%
12.4%
2.4%
2.6%
0.7%
1.1%
0.3%
23.3x
20.6x
34.3x
21.5x
17.9x
19.3x
14.0x
11.5x
11.4x
10.8x
9.3x
7.9x
Public Equity Market Valuation Trends (Cont’d)
Source: S&P Capital IQ as of March 29th, 2018 * Each index is comprised of the companies noted on page 13
EV / 2018P EBITDA 5-Year Est. EPS Growth LTM EBITDA Margin P / 2018 EPS
Quick Service
Coffee & Specialty
Fast Casual
Family Dining
Fine Dining & Polished
Casual
Casual Dining
3-Year Avg. SSS Growth
Median: 11.1x Median: 21.0x Median: 0.9% Median: 12.1% Median: 13.6%
(0.1%)
![Page 7: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/7.jpg)
7
Restaurants I Industry Spotlight
Q1 2018
0
4,000
8,000
12,000
16,000
20,000
24,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD3/17
YTD3/18
Under $25mm $25 to $500mm Above $500mm Undisclosed
$338
$513$600 $652 $640
$531 $521$565
$629$624
$677 $693
$848
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17*
Cu
mu
lati
ve
Dry
Po
wd
er
($ i
n b
illi
on
s) 2017
2016
2015
2014
2013
2012
2011
2010
Overhang by vintage
U.S. corporate cash balances continue to reach record levels and are driving activity in strategic buyer M&A
Historically, M&A cycles have not extended past seven years; 2017 was year eight of the current cycle
2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened activity
− 2018 tax policy changes and cash repatriation expected to support continued M&A activity
Transaction Volume
Recession Recession
▼ 15%
▲30%
S&P 500 – Aggregate Corporate Cash & Equivalents Global Private Equity Capital Overhang by Year
Record levels of uncalled dry powder continue to accumulate in North American and European private equity funds
U.S. M&A Volume and Valuation Trends
($ in billions) ($ in billions)
Note: This data represents the entire U.S. market (all industries) Source: PitchBook, S&P Capital IQ, and S&P Capital IQ LCD * Pitchbook as of June 30th, 2017
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Over $1.9 trillion
![Page 8: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/8.jpg)
8
Restaurants I Industry Spotlight
Q1 2018
10.0x 10.2x9.5x
10.9x 11.1x9.8x 9.3x 9.5x
7.9x9.6x9.5x
8.2x9.8x
10.6x11.7x 11.1x
12.3x13.3x
12.0x 11.6x
0.0x
5.0x
10.0x
15.0x
2010 2011 2012 2013 2014 2015 2016 2017 1Q2017 1Q2018
Middle Market > $1 Billion
$0
$50
$100
$150
$200
$250
1Q
201
0
2Q
201
0
3Q
201
0
4Q
201
0
1Q
201
1
2Q20
11
3Q
201
1
4Q
201
1
1Q
201
2
2Q
201
2
3Q
201
2
4Q
201
2
1Q
201
3
2Q
201
3
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q
201
4
4Q
201
4
1Q
201
5
2Q
201
5
3Q
201
5
4Q
201
5
1Q
201
6
2Q
201
6
3Q
201
6
4Q
201
6
1Q
201
7
2Q20
17
3Q
201
7
4Q
201
7
1Q
201
8
Middle Market > $1 Billion
Restaurant M&A accelerated in 2017
Increased activity in full & limited service
All types of transactions (growth-oriented recaps, LBO’s, go-private and corporate carve-outs)
Reflects the market’s view that restaurants continue to be value opportunities, versus:
− Retail: difficult to predict timing, intensity of down-cycle
− Consumer products: continue to be expensive
− Food: dominated by strategic buyers with deep pockets
Bifurcation in valuations continued despite continued activity
High-performing assets continued to get “premium” multiples
Challenged assets continued to see multiple compression
The above data supports trends that were consistent throughout 2017:
Limited service franchisors continue to command the highest valuations
Fast casual deal activity continues to be driven by growth investments in the lower middle market
Full service is once again attractive, but for different reasons than limited service (focus on IRR vs. growth)
Buyers are making smaller bets on full service businesses
Restaurant Sector M&A Trends
U.S. Consumer & Retail M&A Announced Deal Value ($ in billions) [1,2]
U.S. Consumer & Retail M&A Announced Deal Volume
U.S. Consumer & Retail M&A Closed Deal Average EV / EBITDA Multiple [1,2]
Source: Fifth Third Securities, S&P Capital IQ [1] Middle Market transactions defined by transactions with an enterprise value below $1 billion [2] U.S. Consumer & Retail transactions include Consumer Discretionary and Consumer Staples transactions, and exclude outlier multiples
0
250
500
750
1,000
1Q
201
0
2Q
201
0
3Q
201
0
4Q
201
0
1Q
201
1
2Q
201
1
3Q
201
1
4Q
201
1
1Q
201
2
2Q
201
2
3Q
201
2
4Q
201
2
1Q
201
3
2Q
201
3
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q20
14
4Q
201
4
1Q
201
5
2Q
201
5
3Q
201
5
4Q
201
5
1Q
201
6
2Q
201
6
3Q
201
6
4Q
201
6
1Q20
17
2Q
201
7
3Q
201
7
4Q
201
7
1Q
201
8
Median Middle Market: $14.1
Median Middle Market: 9.8x
Median > $1 Billion: $27.1
Median > $1 Billion: 11.1x
![Page 9: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/9.jpg)
9
Restaurants I Industry Spotlight
Q1 2018
Restaurant Sector Precedent M&A Transactions ($ in millions) [1,2]
Restaurant Sector Precedent M&A Transactions
Source: Company Filings, S&P Capital IQ [1] * Excluded from mean and median [2] Green shading indicates strategic acquisition [3] Qdoba’s EBITDA was estimated assuming that ~17% of JACK’s total SG&A is attributable to Qdoba operations [4] SET:TU acquired a 25% minority stake from Golden Gate Capital
Transactions completed or announced over the past four years
Announced Enterprise LTM
Date Acquirer Target Value (EV) Revenue EBITDA Revenue EBITDA
03/08/18 Spice Private Equity AG Bravo Brio Restaurant Group, Inc. (NasdaqGS:BBRG) $101 $505 $27 0.2x * 3.8x *
02/20/18 Rhone Capital Fogo de Chao, Inc. (NasdaqGS:FOGO) 560 311 53 1.8x 10.6x
02/01/18 Elysium Management Huddle House, Inc. - - - - -
12/19/17 Apollo Global Management (NYSE:APO) Qdoba Restaurant Corporation [3]305 457 38 0.7x 8.0x
11/28/17 Roark Capital Group Buffalo Wild Wings, Inc. (NasdaqGS:BWLD) 2,885 2,061 255 1.4x 11.3x
11/08/17 Panera Bread Co. / JAB Holding Co. Au Bon Pain Corporation - - - - -
10/16/17 NRD Capital Management Ruby Tuesday, Inc. (NYSE:RT) 314 1,046 37 0.3x 8.5x
09/06/17 FAT Brands (NasdaqCM:FAT) Ponderosa Franchising / Bonanza Restaurant Companies 11 4 2 2.8x 6.9x
08/24/17 Caribou Coffee Company Bruegger's Enterprises - - - - -
06/06/17 Landry's Ignite Restaurant Group (OTCPK:IRGT) 55 550 17 0.1x * 3.3x *
04/05/17 Axum Capital Partners Back Yard Burgers - - - - -
04/05/17 JAB Holding Co. Panera Bread Co. 7,500 2,885 424 2.6x 17.7x *
03/27/17 Darden Restaurants (NYSE:DRI) Cheddar's Scratch Kitchen 780 - 75 - 10.4x
03/23/17 Oak Hill Capital Partners Checkers Drive-In Restaurants, Inc. 525 - - - -
02/21/17 Restaurant Brands International Inc. (NYSE:QSR) Popeyes Louisiana Kitchen, Inc. 1,815 267 89 6.8x * 20.5x *
01/24/17 Golden Gate Capital Bob Evans Farms, LLC 565 - - - -
10/26/16 Restaurant Brands New Zealand Ltd. (NZSE:RBD) Pacific Island Restaurants 105 120 19 0.9x 5.5x
10/10/16 Thai Union Group Public Company Limited (SET:TU) Red Lobster Master Holdings, L.P. [4]1,265 2,479 144 0.5x 8.8x
09/08/16 Roark Capital Group Jimmy John's Franchise, LLC - - - - -
09/02/16 CenterOak Partners LLC Wetzel's Pretzels, LLC - - - - -
05/25/16 MTY Food Group (TSX:MTY) Kalaha Corp. (Multi-Concept Franchisee) 302 729 - - -
05/09/16 JAB Holding Co. Krispy Kreme Doughnuts, Inc. 1,298 519 73 2.5x 17.8x *
07/14/15 BC Partners Cote Restaurants 391 172 38 2.3x 10.4x
07/07/15 Casual Dining Group Las Iguanas 131 - - - -
05/22/15 NRD Capital Frisch's Restaurants, Inc. 173 216 24 0.8x 7.3x
03/12/15 Levy Acquistion Group (n.k.a. NasdaqCM: TACO) Del Taco Holdings 500 385 59 1.3x 8.5x
09/29/14 JAB Holding Co. and BDT Capital Partners, LLC Einstein Noah Restaurant Group 481 438 45 1.1x 10.7x
08/26/14 Burger King (n.k.a. NYSE:QSR) Tim Hortons Inc. 13,419 3,050 767 4.4x * 17.5x *
07/12/14 Hony Capital PizzaExpress 1,539 637 151 2.4x 10.2x
07/01/14 Berkshire Partners The Portillo Restaurant Group, Inc. 1,000 303 97 3.3x 10.3x
05/23/14 Roark Capital Group Corner Bakery 300 375 29 0.8x 10.3x
05/20/14 Sentinel Capital Partners, LLC TGI Friday's Inc. 790 1,129 113 0.7x 7.0x
05/15/14 Golden Gate Capital Red Lobster Seafood, Co. 2,113 2,641 230 0.8x 9.2x
03/13/14 Chatham Credit Management Furr's Restaurant Group 23 113 3 0.2x 8.4x
02/07/14 A5 Fund, Cerberus Capital Fox and Hound Restaurant Group Inc. 130 - - - -
01/16/14 Apollo Global Management (NYSE:APO) CEC Entertainment, Inc. (NYSE:CEC) 1,309 818 166 1.6x 7.9x
Median - Full Service 0.8x 9.0x
Median - Limited Service 1.2x 8.3x
Median - All 1.2x 8.8x
EV / LTM
![Page 10: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/10.jpg)
10
Restaurants I Industry Spotlight
Q1 2018 Middle Market Private Equity Activity
U.S. Private Equity Deal Flow ($ in billions)
U.S. Consumer & Retail Private Equity Deal Flow ($ in billions)
U.S. Consumer & Retail Private Equity Exits ($ in millions)
Source: Fifth Third Securities, PitchBook ND – No Transaction Values Disclosed *1Q18 preliminary PitchBook data
0
500
1,000
1,500
$0
$50
$100
$150
$200
1Q
12
2Q
12
3Q
12
4Q12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
1Q15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q17
3Q
17
4Q
17
1Q
18*
Deal Value ($) # of Deals Closed
$145.0 $100.0
$278.6 $200.0
$300.0
$135.0 $92.5
$400.0 $240.7
$280.0 110 125
169 155206 202
214 211
55 39
2010 2011 2012 2013 2014 2015 2016 2017 1Q2017 1Q2018
Median Deal Size ($) # of Exits
$45.5 $49.7 $53.0
$74.5$62.1
$120.3
$69.1 $66.5
$6.9
$42.9
546 656 741 685 795915 844 789 203 183
2010 2011 2012 2013 2014 2015 2016 2017 1Q2017 1Q2018
Capital Invested ($) # of Deals Closed
Private Equity deal flow was down on a volume basis but up slightly on a value basis during the first quarter of 2018
The two biggest concerns for dealmakers in 2018 continue to be the high-priced environment and lack of quality targets
Total market acquisition multiples were elevated through 2017:
– Median EV/EBITDA: 10.5x
– Median debt/EBITDA: 5.7x
Middle market deal values also pushed forward in 2017:
– Average EV / EBITDA: 8.1x
– Average debt / EBITDA: 4.4x
Strength in fundraising continues to raise the amount of dry powder to record levels
Private equity buyers continue to search for investment thesis
Opportunities for lucrative retail or consumer targets remain scarce
However, larger conglomerates are increasingly seeking divestitures of non-core assets (Johnson & Johnson, Newell Brands)
Buyers have sought out high growth opportunities in consumer services, primarily in fitness studios (e.g. Planet Fitness & Orangetheory)
![Page 11: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/11.jpg)
11
Restaurants I Industry Spotlight
Q1 2018
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
MM B-rated MM NR
Note: This data represents the entire U.S. middle market (all industries) Note: The middle market is defined as deal size < $100 million and borrower sales < $500 million [1] Includes both non-sponsored and sponsored transactions; sufficient data not available for MM NR loans in 1Q15 and 1Q17 Source: Bloomberg, S&P Capital IQ LCD, and Thomson Reuters LPC
U.S. Middle Market Loan Market Trends
Loan Volume: Low Level of Supply Remains Yields Continue to Decline for Middle Market Non-rated Issuers [1]
Middle Market Covenant-Lite Volume Surges in 4Q 2017 Leverage Multiples Remain Aggressive on Middle Market LBOs
($ in billions)
6.09%
5.80%
($ in billions)
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
Non-Sponsored Sponsored
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
MM Covenant-Lite Volume
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
1st Lien Debt to EBITDA Junior Debt to EBITDA
![Page 12: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/12.jpg)
12
Restaurants I Industry Spotlight
Q1 2018 Appendix: Key Disclosures
Casual Dining
BJRI – BJ’s Restaurants, Inc.
BLMN – Bloomin’ Brands, Inc.
CHUY – Chuy’s Holdings, Inc.
DAVE – Famous Dave’s of America Inc.
DIN – DineEquity, Inc.
DRI – Darden Restaurants, Inc.
RRGB – Red Robin Gourmet Burgers Inc.
TXRH – Texas Roadhouse, Inc.
PLAY – Dave and Buster’s Entertainment, Inc.
EAT – Brinker International, Inc.
Family Dining
BH – Biglari Holdings Inc.
CBRL – Cracker Barrel Old Country Store, Inc.
DENN – Denny’s Corporation
Fine Dining & Polished Casual
CAKE – The Cheesecake Factory Incorporated
DFRG – Del Frisco’s Restaurant Group, Inc.
KONA – Kona Grill Inc.
RUTH – Ruth’s Hospitality Group Inc.
JAX – J. Alexander’s Holdings, Inc.
Limited Service Restaurants Full Service Restaurants
Coffee & Specialty
DNKN – Dunkin’ Brands Group, Inc.
JMBA – Jamba, Inc.
SBUX – Starbucks Corporation
Fast Casual
CMG – Chipotle Mexican Grill, Inc.
HABT – The Habit Restaurants, Inc.
NDLS – Noodles & Company
PBPB – Potbelly Corporation
SHAK – Shake Shack Inc.
ZOES – Zoe’s Kitchen, Inc.
FRGI – Fiesta Restaurant Group, Inc.
Quick Service Restaurants (QSR)
BOJA – Bojangles’, Inc.
DPZ – Domino’s Pizza, Inc.
FRSH – Papa Murphy’s Holdings, Inc.
JACK – Jack in the Box Inc.
LOCO – El Pollo Loco Holdings
MCD – McDonald’s Corp.
PZZA – Papa John’s International
QSR – Restaurant Brands International Inc.
SONC – Sonic Corp.
WEN – The Wendy’s Company
YUM – Yum! Brands, Inc.
WING – Wingstop Inc.
![Page 13: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/13.jpg)
13
Restaurants I Industry Spotlight
Q1 2018 Notes & Definitions
S&P 500 Index- A broad index that includes American Companies. EBITDA- A company's earnings before interest, taxes, depreciation, and amortization, is an accounting measure calculated using a company's net earnings, before interest expenses, taxes, depreciation and amortization are subtracted, as a proxy for a company's current operating profitability. Dry Powder- Refers to cash reserves kept on hand to cover future obligations or to purchase assets. GDP- Gross domestic product is the market value of the goods and services produced by labor and property located in the United States Consumer Sentiment Index- The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in December 1964 National Unemployment Rate- the percentage of the total labor force that is unemployed but actively seeking employment and willing to work. Non-Farm Payroll- Nonfarm payroll employment is a compiled name for goods, construction and manufacturing companies in the US. It does not include farm workers, private household employees, non-profit organization employees, or government employees . It is an economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market. Housing Starts- are the number of new residential construction projects that have begun during any particular month. The Economist- offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them LBO -- leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. Industrial Production Index (IPI)- is an economic indicator published by the Federal Reserve Board of the United States that measures the real production output of manufacturing, mining, and utilities Capital Goods Orders. Covenant-lite loans- means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income. IRR-Internal Rate of Return.
![Page 14: Investment Banking I Industry Spotlight · 2020-02-28 · 2017 demonstrated signs of the cycle slowing, however the bull equity market and excess capital continue to support heightened](https://reader033.vdocument.in/reader033/viewer/2022041915/5e698b416145071af621f0b1/html5/thumbnails/14.jpg)
14
About Fifth Third Capital Markets
Fifth Third Capital Markets is the marketing name under which Fifth Third Bank and its subsidiary, Fifth Third Securities, Inc., provide certain securities and investment banking products and services. Banking products and services are offered by Fifth Third Bank. Securities products and services are offered by licensed securities representatives of Fifth Third Securities, Inc., who may be employees of Fifth Third Bank. Important notice This document has been prepared by Fifth Third Bank (“Fifth Third”) or one of its subsidiaries for the sole purpose of providing a proposal to the parties to whom it is addressed in order that they may evaluate the capabilities of Fifth Third to supply the proposed services. It is not intended to provide specific investment advice or investment recommendations and does not constitute either a commitment to enter into a specific transaction or an offer or solicitation, with respect to the purchase or sale of any security. The information contained in this document has been compiled by Fifth Third and includes material which may have been obtained from information provided by various sources and discussions with management but has not been verified or audited. This document also contains confidential material proprietary to Fifth Third. Except in the general context of evaluating our capabilities, no reliance may be placed for any purposes whatsoever on the contents of this document or on its completeness. No representation or warranty, express or implied, is given and no responsibility or liability is or will be accepted by or on behalf of Fifth Third or by any of its subsidiaries, members, employees, agents or any other person as to the accuracy, completeness or correctness of the information contained in this document or any other oral information made available and any such liability is expressly disclaimed. This document and its contents are confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person in whole or in part without our prior written consent. Past performance is No Guarantee of Future Results. Fifth Third Capital Markets is the marketing name under which Fifth Third Bank and its subsidiary, Fifth Third Securities, Inc., provide certain securities and investment banking products and services. Fifth Third Capital Markets offers investment banking++, debt capital markets+, bond capital markets++, equity capital markets++, financial risk management+, and fixed income sales and trading++. Fifth Third Bank provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and registered investment advisor registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Securities and investments offered through Fifth Third Securities, Inc. and insurance products: + Services and activities offered through Fifth Third Bank ++ Services and activities offered through Fifth Third Securities, Inc © Fifth Third Bank 2018
Are Not FDIC Insured Offer No Bank Guarantee May Lose Value
Are Not Insured By Any Federal Government Agency Are Not A Deposit