Blog 6- Frankie and Benny's and Wagamama merger- is it a good deal?

Mergers and Acquisitions are often difficult business, and can sometimes turn hostile. A hostile M&A occurs when the acquiring company goes directly to the target companies shareholder. As a manager a hostile takeover is not the situation you ever want to be in, as it implies in the name it can cause hostility and tension within the company. Luckily the majority of Mergers and Acquisitions occur through negotiations and patience.
October 2018  saw the merger of Frankie and Benny’s and noodle chain Wagamamas for a deal worth around £559 million. The restaurant group, who also own Chiquito, had seen sales fall by 0.5%, whereas Wagamama had seen climbing revenues from £266m in 2017 to £307m in 2018 in a part of the restaurant market that has been struggling. The casual dining market has been struggling, however, Wagamamas has clearly been doing something right. The Restaurant Groups clear aim is to focus on Wagamamas, they plan to continue to open new Wagamamas and convert some of their existing restaurants into them, in my opinion this is a good strategic approach to take, as it is clear that Wagamamas has had a more financially successful year than The Restaurant Groups other chains such as Frankie and Benny’s. Mergers and Acquisitions are often a long drawn out process, both sides negotiating to get the best deal possible, Wagamamas would be hoping to get the best price possible to satisfy their shareholders, however in my opinion a better deal could have been made the owners of Wagamamas were hoping to get £750 million for the chain. This suggests a large amount of negotiating took place as there is a substantial difference between what they wanted and what they eventually got for their company.
It was reported that shareholders were not happy with the deal, as it meant that the restaurants were only worth £4 million each, in my opinion this seems like an excellent deal that The Restaurant Group has made, especially considering that Wagamamas were financially stable and doing well sales wise. You can understand why Wagamamas shareholders were not impressed with the deal and they have the right to question why the management did not press for a better deal for them. On the other hand if I was a shareholder in the Restaurant Group I would be delighted that the management were investing in acquiring  another company that was financially doing a lot better than the one I was a shareholder in.
Why would Wagamamas owners sell for that price? Perhaps the owners wanted to move away from the Restaurant business, or perhaps they can see a change in the fortunes for Wagamamas and predicted a change in sales just like Frankie and Benny’s, it is more than likely to be this reason. It is well known that the restaurant market it struggling within the UK, with many restaurants closing its doors such a Jamie’s Italians, I believe that they have sold at the right time, they were making a profit which would only help to encourage higher bids and the markets are more likely to slow down during this time of year.
As the deal has only recently been completed the world awaits the changes The Restaurant group make and we can only wait for new sales figures to arrive at the end of this quarter. However in my opinion, the Restaurant group has made an excellent investment by acquiring Wagamamas.