Piper makes 6x return from Las Iguanas

Piper Private Equity has sold its minority stake in UK Latin American-themed restaurant chain Las Iguanas to Bowmark Capital for £27 million, registering a 6 times return with a 40 percent IRR over five years.

UK buyout firm Bowmark Capital has bought Latin American-themed restaurant chain Las Iguanas from UK retail and consumer specialist Piper Private Equity for £27 million ($54 million, €40 million). 

Piper Private Equity bought a stake of about 40 percent in the business in July 2002 for £3 million, providing half the equity. It said in a statement the sale had provided a 40 percent IRR and a 6 times return on its investment.

Peter Kemp-Welch from Piper, said: “We took it on as a small business and we’ve grown it from four restaurants to fourteen. It operates in an interesting area with spicy but not hot cuisine, which is clearly a growing trend if you examine Mexican sections in supermarkets.” Despite this, there are relatively few Mexican food chains on the high street in comparison to Italian and burger chains, he added, which suggests there is plenty of room for growth.

Bowmark Capital invested £10.5 million of equity alongside management, while the Royal Bank of Scotland provided senior debt facilities. 

Las Iguanas’ sites include the Royal Festival Hall and the O2 arena in London. The business is led by Eren Ali and Ajith Jaya-Wickrema, who founded the company in 1991. Ali said the company planned to open a further 20 sites over the next three years. 

Kevin Grassby, at Bowmark Capital, said: “Like all these overnight successes it has actually been around a long time, but in its current market position it has scope to grow to about 20 sites and then probably a lot more.” 

Bowmark Capital made a 3.9 times return, with an internal rate of return of 45 percent, when it sold its 30 percent stake in restaurant chain Living Ventures to The Restaurant Group in 2005. Bowmark invests in UK companies with an enterprise value of between £10 million to £75 million, and it has backed over 50 growth businesses.

UK restaurant chains have been very popular with buyout firms in the last year. Property entrepreneur Robert Tchenguiz managed to triumph against The Blackstone Group in the bidding war for the La Tasca tapas chain with a £96 million bid.

However, the US buyout firm recovered from its defeat to buy Italian chain La Strada for £140 million from restaurateur Richard Caring, also reportedly in competition with Tchenguiz.  

Blackstone originally bought Tragus, the vehicle to which it bolted on La Strada, in December last year. Tragus is the owner of Café Rouge and Bella Italia.