Striking a Good Deal

Lately, M&A deals have become the flavour of the season as we have seen an increasing number of such deals happening in the retail industry. And keeping pace with the larger retail industry, F&B retail has also seen some developments in this area.
Striking a Good Deal
Lately, M&A deals have become the flavour of the season as we have seen an increasing number of such deals happening in the retail industry. And keeping pace with the larger retail industry, F&B retail has also seen some developments in this area.  
 
There are two types of M&A deals currently ruling the Indian F&B industry. The first one is, traditional capital raising deals that independent entrepreneurs are doing to expand their business across the country.
 
And, the second one refers to the consolidation policy, where the brands are buying stakes or acquiring complete stake of a brand, thereby trying to get the economies of scale at a faster pace, and for that, they are merging with an existing brand.
 
In case of Punjab Grill, Lite Bite Food (LBF) acquired the brand and integrated with LBF, whereas in case of Om Pizza, that has been acquired by Pizza Corner, is a merger deal to raise economies of scale.
 
Om Pizzas & Eats Pvt Ltd, the Indian franchisee of Papa John’s International, has merged with Fred Mouawad pizza business of Global Franchise Architects, operating under the Pizza Corner brand. Om Pizza & Eats Pvt Ltd is owned by Avan Projects Pvt Ltd and is being promoted by Atulya Mittal. TVS Capital and the Jawad Group of Bahrain hold a minority stake in Om Pizza.
 
As per the deal, Papa John’s will convert the existing Pizza Corner stores to Papa John’s branded restaurants, by the first quarter of 2015. The announcement reinforced Papa John’s commitment to expand its presence in India, specifically in Bangalore, Chennai and Hyderabad.
 
“Merger happens in case of penetrating the new market, as in case of Papa John’s, where they wanted to penetrate Chennai and the South India market and Pizza Corner gives them a 30-40 existing restaurant size, which will be converted into Papa John’s overnight,” shared, Ashish Saxena, Partner, TVS Capital.
 
“Through this merger with Papa John’s, we have a phenomenal opportunity to meet growing demands by combining Papa John’s world-class pedigree with Pizza Corner’s local expertise. We are confident that both the brands can complement each other and implement their expertise,” explained Joseph Cherian, CEO of GFA Global.
 
Commenting on the same, John Schnatter, Founder & CEO, Papa John’s Global shared, “We are energised about this accelerated international expansion for Papa John’s in Southern India. The merger provides us the opportunity to penetrate the market at a much more rapid pace, and increase our scale in a shorter period.”
 
What’s driving
 
The slowdown in number of outlets, cost cutting in managing the central kitchen and the backend of a brand is leading to sluggish organic growth of players, where they are going in for acquisitions to achieve economies of scale.
 
And according to experts, the industry could see more such buys in the coming months, where the small players or the franchisees may sell their existing business to a big player or the franchisee, which is successfully running business.
 
Moreover, each brand or every restaurateur today wants to reach out to a good number of customers, to deliver better ingredients, best quality product promising to create a preferred brand for the people in the country.
 
“As far as Pizza Corner is concerned they have not very aggressively been able to grow 
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