Barracuda

Barracuda Group was one of the UK’s biggest pubs and bars operators, with four distinct brands - Smith and Jones, Varsity, Barracuda Bar and Juniper Inns.

Our investment

We have extensive experience in the pub sector. In early 2000, the managed pub sector was out of favour with valuation multiples much lower than for tenanted pub businesses. Recognising this, we sold our tenanted pub investment, Pubmaster, and teamed up with leading industry expert Mark McQuater to pursue opportunities in the managed pub sector.

Our aim was to buy and build a top quality managed pub business operating in niche markets within secondary towns and suburban high streets, which at the time were poorly served by other national operators.

We reviewed multiple potential acquisitions before completing the £50m acquisition of a high-quality and largely freehold estate of 35 pubs from Enterprise Inns in July 2000.

Value creation

This was a highly successful buy and build with the initial acquisition quickly followed in October 2000 with the purchase of AIM-listed Ambishus Pub Company in a £36m public to private transaction. This deal added a further 61 pubs to the group.

In September 2001, we bought another 50 sites from Wolverhampton and Dudley for £37m, including 19 student-focused Varsity pubs. In October 2002, Barracuda bought a further eight bars owned by Old Monk.

In each case, we rapidly integrated the acquisitions into the group. We sold the lower quality pubs and, with many of the remaining sites benefitting from a substantial refurbishment and rebranding programme, operational performance improved significantly.

We worked with the management team to set up a strong corporate structure for the newly created business, including the introduction of John Conlan, an experienced leisure sector chairman, and the recruitment of a new finance director.

We then turned our focus to the development of individual sites where the average return on investment for the 39 new sites opened was about 30%.

During the period of our investment, Barracuda became one of the top 10 managed pub companies in the UK, growing from 35 to 155 units with a development pipeline of more than 60 further sites.

Branch EBITDA grew from £12.3m in 2001 to £29.3m in 2005. The business became the fastest growing managed pub company in the UK, with market leading operating margins and won The Publican awards for Pub Company of the Year and Retail Brand of the Year.

Outcome

We started an auction process in 2005, which involved trade, property and private equity bidders. We sold Barracuda in June 2005 to private equity firm Charterhouse for £262m, resulting in a return of 2.9x cost and a 27% IRR.

Sector

Consumer

Location

United Kingdom

Investment date

2000

Exit date

2005

Deal size (exit)

£262m

Fund

Mid-market fund

Status

Realised

Strategy

Key facts

35 to 155

sites

60

further sites in development pipeline

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