Multi-Unit Franchisee Magazine Issue II, 2011 | Page 61

year for us following a very quiet 2008 and 2009. We saw the
rebound in M&A activity and a willingness of buyers to buy
and sellers to sell.”
So, is it a good time to sell? “Yes, I would say so,” she says, “but
it depends on franchisee performance and the sector they’re in.”
“Traditionally, private equity groups were just interested in
franchisors,” says Burt Yarkin, managing director of the San
Francisco branch of The McLean Group, a private investment
firm. Yarkin was CEO of Cartridge World in 2007 when the
company was purchased by a private equity fund. “These days
there are so many private equity firms with so much money
out there, so they’re willing to move up to large multi-unit
franchisee firms.”
As Yarkin sees it, “There is going to be a lot of activity for the
next couple of years. The money
that’s out there is not going to find
a home very quickly.” If someone
is thinking of selling, he says, the
next two years will be an opportune time.
Historically, private equity
interest in franchising has been
mostly on the franchisor side
(although a number of players
have invested in large franchisee
Burt Yarkin
organizations). One reason is a
lack of understanding or appreciation of the franchise model.
Another is simply size: most of the multi-unit organizations a
decade ago simply weren’t big enough to attract investor interest. However, as investors’ understanding of franchising grew,
so did multiples, which made deals less attractive to investors
seeking a high return on their investment.
Today’s lower multiples for franchisee companies following
the peak years of 2005 to 2007 are another factor driving M&A
activity in 2011. “With multiples down, there really is an opportunity for upsides, because multiples will come back,” says
Monroe. “They’re not terribly low, but they are low enough
for some upward movement.” When multiples got too high,
private equity investors found it difficult, if not impossible, to
justify investing in high-performing fra