Zolfo Cooper oversees sale of 43 Strada restaurants

02 October 2014 Consultancy.uk

UK casual dining operator Tragus Group has recently sold 43 Strada restaurants to a subsidiary of SCP Sugar Limited, an entity within Sun Capital Partners. The divestment is part of a wider restructering plan, aimed at reducing its debt and refocusing its strategy to the development of its Bella Italia and Café Rouge brands. The deal was overseen by consulting firm Zolfo Cooper and law firms Olswang and Taylor Wessing.

Tragus is a UK restaurant operator with a portfolio of more than 295 restaurants, consisting of the brands Café Rouge, Belgo, Strada, Bella Italia and Brasseries. The company was founded in 2002 and targets the casual dining segment – with offerings ranging from pizza and pasta to French classics.

Strada Restaurants

Earlier this year, Tragus announced a sweeping restructuring plan, following disappointing financial results and mounting debts. To support the financial and operational restructuring, the firm brought in the help of Zolfo Cooper, an advisory and restructuring specialist with 5 offices across the UK. The consultants advised Tragus on future options, and as part of the broader plan Tragus decided to offload its upmarket Italian Strada brand. After a competitive sales process and negotiations with several interested parties, the Strada business was earlier this week sold to Sun Capital Partners, a private equity firm co-founded by industry expert Hugh Osmond. “This process attracted a considerable amount of interest which underlines the strength of the Strada brand,” says Paul Hemming, Partner at Zolfo Cooper.

As well as acquiring the 43 restaurants, Sun Capital Partners will also employ all associated restaurant and head office staff. Shortly after the deal, the new owner announced ambitious plans for Strada, including the expansion of Strada’s footprint further investments in the existing sites.

Tragus Group | Sun Capital Partners | Zolfo Cooper | Olswang | Taylor Wessing

For Tragus, the divestment provides it with the strategic focus and funds to further bolster its remaining portfolio. “The sale of Strada marks a successful end to the Tragus Group restructuring process which created a more focused business, with 200 high quality Café Rouge and Bella Italia sites across the UK,” comments Tragus Group CEO Steve Richards. In the coming 12 months the firm aims at growing its number of locations by 30, with a  medium term objective of up to 500 restaurants. “The sale to Sun has delivered an excellent outcome for all stakeholders as Tragus continues to reposition itself for growth,” adds Hemming.

Taylor Wessing acted as legal advisor for Zolfo Cooper, while Sun Capital hired law firm Olswang.

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8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.