Why Dunkin’ is looking to private equity, again

Erika Beras Oct 26, 2020
Heard on: Marketplace
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Dunkin’ Brands was sold to private equity firms in 2005, then it went public again in 2011. Michael M. Santiago/Getty Images

Why Dunkin’ is looking to private equity, again

Erika Beras Oct 26, 2020
Dunkin’ Brands was sold to private equity firms in 2005, then it went public again in 2011. Michael M. Santiago/Getty Images
HTML EMBED:
COPY

Dunkin’ Brands Group is reportedly in talks to be acquired by Inspire Brands, whose portfolio includes Arby’s and Jimmy John’s. Dunkin’ has a market value of $7.3 billion with over 12,000 locations. The coffee and doughnut giant had been a private company then went public. Now it may go private again.

“Going private could be beneficial for companies trying to reposition itself or to make substantial changes to its business model,” explained Carnegie Mellon finance professor Deeksha Gupta.

Dunkin’ had a rough go of it at the start of the pandemic. Then sales picked up, but still aren’t what they used to be. So an acquisition might make sense, Gupta said, shielding the company from shareholder scrutiny while the company has time to make big changes that could take years.

It’s a strategy Dunkin’ tried before in 2005, then it went public again in 2011.

It could work for Dunkin’ because the brand is powerful, said Spencer Ross, a marketing professor at the University of Massachusetts Lowell. And the company’s invested in its apps and contactless payments.

“A company like Inspire brands would want to be able to kind of absorb it. And rather than having to duplicate those types of efforts in their brands in their portfolio, they can actually leverage what they’re buying,” Ross said.

Remember that old Dunkin’ ad campaign, “Time to make the donuts”? Well,  it’s been years since Dunkin’ actually made doughnuts on-site. 

The food is made at central points and then distributed through complex logistics networks. And that’s attractive to a buyer, said restaurant industry consultant Christopher Muller. 

“Logistics is a very, very powerful profit enhancer cost reducer for any customer-facing business,” Muller said.

And as the pandemic keeps the pressure on businesses, he said these sorts of public-going-private deals are something we may see more of. 

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