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Why did we invest: Downing was attracted to The Pub People Group (Pub People) as it had built a robust and scalable business with the potential to scale further with the backing of additional investment. Also, given Downing’s expertise, Pub People represented a compelling opportunity to create a new consolidator in a fragmented industry of over 20,000 independent pubs across the UK. This was complimented by Pub People’s innovative operating model designed to improve the retail proposition in each of its pubs while simultaneously minimising operating costs.
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The Pub People Group is a leading Midlands-based pub operator. It owns and operates around 40 pubs, the majority of which are freehold properties.
Over the last decade, Pub People has carefully built a strong portfolio through a selective acquisition process. It has a notable presence across suburban areas and offers flexible and varied offerings to cater to diverse customers, including drink and food-focused pubs with kitchens, outdoor spaces and entertainment such as live music and sports viewing areas.
Pub People’s innovative business model enables entrepreneurial pub operators to enter the industry without major upfront costs or ongoing capital commitments. The company retains sales, cost of goods sold, and other pub operating costs. In return, publicans receive a percentage of sales revenue to cover their own staffing expenses.
This unique arrangement allows for tailored management responsibility based on each pub’s needs. Publicans handle day-to-day operations and staffing while Pub People controls product mix, pricing, and the overall retail proposition. This central oversight enables optimal purchasing and supplier relationships to maintain profitability.
Downing's relationship with Pub People:
Downing has a long track record of successful investments in the pub sector and was keen to partner with a business positioned for scalable growth. Pub People offered an established portfolio of assets along with a platform primed for expansion through additional investment.
Beyond an attractive existing estate, the company benefits from limited maintenance capital expenditure needs and a high cash conversion ratio.
Larger competitors are saddled with considerable leverage, so rising debt costs have made acquisitions more challenging for them. With versatile financing options, Downing is uniquely positioned to back businesses like Pub People seeking to undertake roll-up acquisition strategies.
Additionally, Downing had an established relationship with the driven and ambitious existing management team. We saw potential to supplement the team with financial and operational expertise and knew the business would benefit from our prior experience in the sector. Our partnership offered the chance to unlock Pub People’s full potential with an injection of growth capital and support.
Downing's value add:
M&A and capital structure optimisation
We have provided the business with both debt and equity investment to make bolt-on acquisitions, invest and upgrade the platform and refinance third-party bank debt, without the need for additional capital from the management.
In the first twelve months, Pub People has increased the size of its freehold estate by c.70%.
The incumbent CFO was seeking to retire, and the finance function required enhancement to take full advantage of the platform. We appointed a CFO with significant experience within the sector and a seasoned chair to provide guidance and support to senior management.
Increased strategic focus and clarity
Our view was that with fresh access to capital and a more ambitious approach, we could help accelerate Pub People’s growth through bolt-on acquisitions and refurbishment of assets in the existing portfolio.
We have helped to improve focus with a clear strategy to segment the existing estate and offering and identify non-core assets that management is disposing of.
We saw opportunities to implement new technological solutions – i) upgrading the ERP system (enterprise resource planning) from Sage to Oracle’s NetSuite and ii) installing a new EPOS solution (electronic point of sale) in each pub to improve the integration of financial information.
Pub People MD Andy Crawford said: “The recent acquisitions and investment underlines our commitment to expanding our high-quality estate of pubs. I am very excited to progress our discussions for further acquisitions in the coming months, which will support Pub People’s bid to become a market leader in its chosen regions. I value the support from Downing, which will allow me and my team to take Pub People into the next phase of its evolution.”
With Downing’s continued support, Pub People is well on its way to building one of the largest community pub operators in its core geographies. The company offers a promising platform for growth in a fragmented sector ripe for consolidation.