Restaurant Group goes all Wagamama
If your existing businesses aren’t performing well then the solution is simple: buy another business that is performing well for an exalted price! This appears to be the logic of The Restaurant Group (RTN) in its £559 million takeover of Wagamama (RTN latest share price 254p, market cap £510 million).
Great businesses create desirable products and services. If their products are sufficiently differentiated, they will experience robust demand. Apple Inc is a great example with the company developing a number of hit products.
Weak businesses, in my view, turn towards acquisitions. A large acquisition is generally a sign of failure. The acquiring company is admitting that it failed to recognize an emerging trend or develop a new product.
Apple Inc has seldom done deals, instead creating its market-leading products in-house (though its takeover of Beats for US$3bn in 2014 highlighted its failure up to that point to recognise the growing popularity of music streaming).
Wagamama is a class act
There is no doubt that Wagamama is a highly successful business with robust trading and strong growth.
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