LDC invests £20m in UK restaurant sector

The in-house private equity arm of Lloyds Banking Group has allocated £20m to Hill Capital Partners, which invests in UK-based bars and restaurants.

LDC, the buyout arm of Lloyds Bank, has teamed up with Hill Capital Partners to invest £20 million in promising small UK-based restaurants, it said in a statement.

The capital will be allocated on a deal-by-deal basis and is likely to be deployed in the next 12 to 18 months, Tim Farazmand, a managing director of LDC, told Private Equity International. The capital will be spread over approximately four to five deals, he added. 

LDC, usually a direct investor, will use an external investment vehicle to invest in the restaurant sector. Hill Capital Partners will make investments between £1 million and £4 million. “We decided to work with a partner because the deals are at the small end of what we normally do,” Farazmand said. “We can outsource some of the deal negotiations to a partner that we know and trust, so this is an efficient way to deploy our capital”.    

LDC decided to back Hill Capital Partners because its founder, Paul Campbell, has a track-record in the restaurant sector. Campbell used to be a finance director at Italian food chain Pizza Express. Additionally he set up restaurant business The Clapham House Group using £15 million raised on the alternative investment market. He sold the business for £40 million to Nando’s Group Holdings in November 2010. LDC, who will be investing on top of some of Campbell’s own capital, will be the only LP in the restaurant fund. 

The fund will not focus on a specific restaurant type, LDC said. “We will look at fine dining as well, we have a very broad scope of restaurant types in mind. The key is for restaurants to have an innovative idea and having the drive and expertise to build up a chain from there,” Farazmand said, adding that “some specific London-based restaurants are holding up remarkably well [in the current climate]”.

It is the second time LDC has outsourced its investments. In August 2007 LDC invested £50 million in Epi-V fund, a specialist fund that invests in emerging technology and service companies within the oil and gas market. In July 2011, the investment unit of Lloyds allocated another £50 million to Epi-V.

LDC has invested approximately £200 million of equity into new businesses since the beginning of this year, it said. It plans to invest an additional £150 million by the end of 2012. LDC has a portfolio of more than 60 current investments with a total value of £2 billion.