Over the past 12 months I have been involved in some interesting restaurant M&A deals in the Asia Pacific region. In all cases, the potential buyers of the asset were other Asian chains or Asia based private equity groups. In no case did a large US chain show any interest. This seems quite odd considering that the Asia Pacific region is the fastest growth area in the world for food service and most US chains are under-represented here. I believe there are several reasons for this.
First, most of these chains have big problems back home. Demand is soft and CEO’s are tying to conserve cash.
Second, they have become very risk averse to any overseas investments and are focused exclusively on a franchise model to grow the business.
Finally, they lack the vision in many cases to understand which market segments offer the best potential and invest in them accordingly.
I believe that these chains have missed out on some great strategic investments by preferring to stay close to home. Opportunities over time will become more expensive and there will be more bidders. Also, the US concepts in many cases do not suit the preferences of local consumers and may therefore not be scalable.
The recent purchase of Pizza Express by Hony Capital is an especially good example of this trend.
Where are the CEO’s and Board Members who will take some risk and allocate future capital to the growth areas of the world and the high potential segments within?