As we recap of the biggest consumer and retail stories of 2017, the Motley Fool Industry Focus team runs through notable mergers and acquisitions in the restaurant sector as an extended "restaurant recession" made several chains attractive buyout targets.
A full transcript follows the video.
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This video was recorded on Dec. 19, 2017.
Vincent Shen: It's also for M&A. This time it's in the restaurant industry. Asit, can you give us a quick overview of some of the buyouts that happened during those several months?
Asit Sharma: Sure. I'm actually going to focus on one of them, because this is surprising. It was the biggest M&A story this year in this space, and it was actually a buyout of a public company, Panera Bread, by private company JAB Holding Company. JAB Holding Company is a huge European conglomerate which owns a lot of coffee interests, and a lot of labels like Peet's Coffee, specialty coffee companies. It owns Dunkin' Donuts [Editor's note: though deal rumors have surfaced, Dunkin' Brands has not yet been acquired by JAB Holdings], and it's branching into other types of businesses like the Panera Bread business.
What's very interesting to me is, in restaurant M&A, we usually think in terms of a struggling competitor that's acquired by a stronger rival. But in this case, Panera Bread was doing just fine, had a great business. Its founder, Ron Shaich, had also started the Au Bon Pain company. A very successful businessman, he wanted to take this company private, because he felt that shareholders, especially institutional shareholders and the threat of activist shareholders, are forcing companies in this industry to make too many short-term decisions, and that's not creating value. In his mind, that's destroying value. Listeners, if you want to read up on this, he gives some very good pointers on this in the article that was in the Boston Globe this past Sunday, and it's called Five Things to Know About Ron Shaich. In this industry going forward, 2018, look for pressure on companies that are successful by these activist shareholders. We've covered a lot of them this year, but this is a double-sided coin. Sometimes, it can create a lot of long-term value, and sometimes it just ends up destroying it.