There has been plenty of noise about deals in the leisure and hospitality sector recently, and, although they tend to be relatively small, all those deals, whether in restaurants, health and fitness, late night bars or pubs, have one thing in common — private equity. Private equity houses and the businesses they back are acquiring assets to take advantage of distressed prices. Even the truest “private equity” — wealthy private individuals — are responding to the low returns from savings accounts by using their cash to get back into the market. The problem, however, is that few people are selling.

Within the restaurant sector, all the leading operators are on the acquisition trail. Trade appears to have stabilised in many cases and those operators that had put expansion plans on hold are back aggressively looking for sites. While there are many distressed restaurants in secondary locations, it is difficult to acquire good sites and there is frenzied bidding for the best. Some leading pub operators have been selling trophy assets and using the proceeds to pay down debt. With the pub market being primarily freehold, pub operators are taking advantage of the undoubted returning strength in the commercial property market and are achieving very good prices for assets. In some instances that will continue and some excellent assets continue to come to the market. Other operators will begin to move their focus to selling their bottom-end stock.

Many investors who came into leisure in 2005-07 have had a torrid time. These funds generally are nursing their wounds. With the recent debt-for-equity swaps taking place, investors have suffered — and It is not only private equity that has been caught; shareholders in Premium Bars & Restaurants and Regent Inns, both quoted companies, have lost their equity.

Jon Moulton, formerly of Alchemy Partners, pointed out recently that more private equity money was spent in 2006 and 2007 than in the preceding 20 years and possibly more than throughout history. Putting the present climate into context, investment is down by more than 95 per cent on that period.

We expect much of the same for the coming 12 months. Within pubs, there may be a small window of opportunity for buyers to continue to take advantage of disposals by Punch, Enterprise Inns and others. Within restaurants, it is difficult to see any big deals happening. In the other sub-sectors, we will see a fight to acquire distressed assets and private equity taking stakes in growing businesses.

The sure sign that the market really has come to life again would be that one big deal happens. Will Mitchells & Butlers ever buy Punch’s managed division? Will Virgin Active launch an IPO? Or will there be another health club merger? Is Capricorn Ventures International ready, at last, to launch a bid for Clapham House? Could Travelodge and Premier Inn marry? Or none of the above.