UPDATE, July 24, 2019: Ares Management confirmed in a Tuesday press release that it has made an investment in Cooper's Hawk, although it did not confirm the sale price. Cooper's Hawk CEO Tim McEnery will continue to hold a portion of the company and will maintain his leadership at the company. He said the new investment and resources of Ares will help the company accelerate its growth plans. The transaction also ended a nine-year partnership with KarpReilly, which sold its minority investment in the company.
- Cooper's Hawk Winery & Restaurants is reportedly in the process of being sold to private equity firm Ares Management for more than $700 million, according to Restaurant Business, which received confirmation of the deal from multiple sources on Thursday.
- The publication reports that the casual chain generated more than $282 million in systemwide sales last year throughout its 35 locations, and that sales have tripled throughout the past five years. The $700 million deal equates to a valuation multiple of at least 17.5 times EBITDA.
- Neither Cooper's Hawk nor Ares Management have yet to confirm the sale.
The high valuation takes into account Cooper's Hawk impressive performance as of late — increasing sales by 16.7% year-over-year in 2018 — but also the upscale casual chain's growing wine club, a major differentiator in an otherwise relatively uniform segment. The club includes more than 350,000 members.
While most chains are chasing convenience demands by adding delivery and other technologies that remove ordering friction, Cooper's Hawk is relying on mealtime experience to stand out and its rapid earnings growth show that it's working. According to Salesforce research, 67% of consumers would be willing to pay for a better experience.
Coopep's Hawk is also likely benefiting from a hot acquisition market in the industry. The past two years have been the most active for M&A in years, according to Restaurant Business, driven largely by an otherwise stagnant path to growth and the ability for multiple brands under one umbrella to function more efficiently and economically in a tough environment.
The casual dining space specifically has been an attractive acquisition target due to declining foot traffic and lack of innovation. Private equity firms have been on a bit of a buying spree in the segment, including Nord Bay Capital's and TriArtisan Capital Advisors' June acquisition of Hooters of America. These firms are more likely to add restaurant brands to their portfolios right now versus traditional retail brands, which are struggling to stay afloat in an Amazon era.
But many brands that are gobbled up by private equity are in need of a strategic turnaround and that is not the case with Cooper's Hawk. According to Nation's Restaurant News, the concept's model — restaurant and wine club — has attracted a more loyal following than most concepts in the competitive environment. CEO Tim McEnery previously told the publication that Cooper's Hawk is a "lifestyle brand," and one that happens to sell millions of dollars of wine and merchandise. Indeed, wine clubs turn a pretty big profit and also tend to retain members for 28 months on average, according to Vine Spring.
Cooper's Hawk's approach is not only driving a profit but also loyalty and traffic. The wine club is growing membership by 25% annually. This acquisition will likely fuel a faster growth clip for the company, whether be it through the addition of new locations and/or an expansion of its winemaking facilities. So, while many believe the deal exceeded valuation expectations, there's no reason Cooper's Hawk should stop doing what it's doing.