Palatine and BDC check out with 2x Hallmark exit
Palatine Private Equity and Bridgepoint Development Capital (BDC) have completed the sale of Hallmark Hotels to Topland.
Palatine and BDC first invested in 2007, each investing GBP9.4m for a combined 78 per cent stake in the business. The sale achieves a 2x return for the private equity firms.
Both private equity investors have executed a buy-and-build strategy. Hallmark was established in 2007 as a vehicle to facilitate the acquisition of under-performing three star hotels with a view to driving operational improvement and achieving a standardised and upgraded level of quality. Today, Hallmark Hotels has a portfolio of eight four star hotels in Manchester, Hull, Bournemouth, Croydon, Derby, Gloucester and Carlisle. The company has over 700 rooms, employs 600 staff and recorded turnover of GBP20.2m in the year to December 2013.
Hallmark was led by chief executive Arnold Schnegg and finance director James Hawksworth. Both have exited the business as part of the sale. Palatine managing partner Gary Tipper and partner Ed Fazakerley were appointed to the board, along with BDC partner Mark Stroud.
The acquisition will take Topland’s portfolio to 30 hotels across the UK, including the Menzies portfolio it purchased in November 2013. The real estate company now operates more than 3,000 hotel rooms across the UK and aims to build a GBP1bn hotel platform in the next few years.
Ed Fazakerley, partner at Palatine Private Equity and former Hallmark non-executive director, says: “Hallmark’s success was achieved through a robust acquisition strategy, driven by a talented and committed management team. The UK hotel market has faced challenging times, but through focus on providing a high quality product combined with significant operational improvements and a coherent sales strategy, we have built an impressive chain of four star hotels. It has been a pleasure working with the management team over the years and we’re pleased to have secured a good return for our investors.”
Mark Stroud, partner of Bridgepoint Development Capital, says: “This has been a successful investment due to a focused buy and build strategy that has achieved impressive growth in EBITDA through both acquisitions and organic growth.”
James Hawksworth, finance director at Hallmark Hotels, says: “Palatine and BDC have been extremely supportive through a period of tough trading conditions for the hotel and leisure market. We’ve worked closely with both to undertake rigorous renovation and operational improvements to our locations across the UK. They’ve been instrumental in boosting the financial performance of the business, while helping to achieve the four-star standard of the Hallmark Group.”
Palatine, Bridgepoint Development Capital and Hallmark received corporate finance advice from KPMG (Neil Meredith and Jonathan Boyers) and legal advice from Shoosmiths (Mark Dawson, Karen Procter and Kelly Harvey).