Your Shout: Christopher Lewey,Close Brothers Corporate Finance

A long-overdue period of consolidation may be about to take place on the UK high street. Following the private equity group GI Partners' recommended offer for Yates Group - made at a chunky 37% bid premium - it believes further private equity firms, many of which have considerable experience of this industry, will reassess the potential offered by the suppressed share prices of high-street bar operators.

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There have recently been a number of disappointing results from high-street operators, and there remain a number of challenges ahead. However, the fact that GI Partners and the senior management of Yates have the confidence to back an MBO gives a strong indication of where they believe the underlying market is heading. Despite a number of recent company failures, there is no sign of the number of licensed premises on the high street falling in the short term. This factor, together with growing cost pressures and Government statements of intention to curb binge-drinking, has cast a shadow over the performance of companies in the sector in recent times. Close Brothers Corporate Finance believes that, by combining two or more smaller players, a private equity firm would be able to obtain significant cost synergies through improved purchasing and removing duplicated head-office costs. There is also scope for improving revenues in a difficult market through having a number of brands to keep the increasingly fickle drinker entertained. In the longer term, reform of licensing may lead to a reduction in the number of new licences being granted, which may address the imbalance of supply. But those operators left behind following any consolidation will find it increasingly difficult to compete against the financial strength of private equity-backed operators such as Yates, as they fight it out for improved like-for-likes in full public view.