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Expansion Capital, May 2000

Background
Taverner Hotel Group is a portfolio of 34 pre-eminent leasehold hotels in Victoria, SA and NSW. Taverner venues include gaming, traditional and trendy bars and bistro lounges, TAB's and conference halls, cafés and nightclubs, kids play areas and bistros/restaurants.

The Taverner Hotel Group was established in 1999 with a growth strategy of becoming Australia’s number one hotel group and received a total of $31 million in investments from the Advent syndicate. To achieve its objective, Taverner focussed on acquiring top quality leasehold hotels which offered superior returns to investors and outstanding value to customers.

Investment rationale
Advent was attracted to the Taverner investment opportunity for
the following reasons:

  • Fragmented industry with multiple acquisition targets available at attractive multiples;
  • Opportunity to build a portfolio of leading hotels with superior profitability in a government regulated market;
  • Target hotel acquisitions selected based on their existing profitability and potential for improved performance given renovations and improved management;
  • Strong cash flow generative business;
  • Strong management team; and
  • A range of buyers once a quality portfolio of hotels could
    be established.
Taverner
s
Taverner

Advent’s role
At initial investment, the group consisted of 2 hotel leaseholds in Victoria and
2 in South Australia.  Revenue was $25 million and EBITDA was $3 million.
Advent was the initial institutional investor, structured several syndicates
and eventually introduced another private equity fund. 
Advent worked with the group to identify, research, negotiate and acquire
its portfolio of hotels.  With the support of Advent, the management team
successfully integrated a diverse portfolio of hotels under a single brand,
across multiple states, creating a leading national pub operator. At exit,
revenue was $262 million and EBITDA was $43 million.

Key challenges were:

  • Identifying acquisition targets that met the Taverner business model
    criteria at attractive multiples;
  • Integrating the acquisitions and “corporatising” the business;
  • Building the necessary information systems for a large business;
  • Staff training and developing an integrated business culture;
  • Making the transition from entrepreneurial to professional
    management by building a senior management team structure; and
  • Positioning for exit and managing the exit process.

Exit
A dual track exit process revealed significant interest from both trade and
private equity bidders. Taverner was sold to Woolworths for $380million
in October 2005, generating an IRR for Advent of 32% over five and a
half years.

www.tavernerhotels.com.au
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