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In depth

Merlin Announces IPO: The Next Chapter of the Story

Merlin Entertainments has announced its intention to float with an initial public offering (IPO) on the London Stock Exchange.

But what will this mean for a Group that has taken the world by storm with aggressive growth strategy built on dynamism and flair?  Can Merlin continue to thrive under public ownership?


After months of speculation, the world’s second largest visitor attraction operator after Disney is set to go ahead.  Merlin was forced to abandon plans for a £2 billion IPO in 2010 due to an unfavourable market in the wake of the world economic crisis; a decision which cost the Group £4.9m in professional and advisory fees.  

Merlin has waited until now to overcome what CEO Nick Varney has referred to as “a shadow of suspicion stalking the markets and a little bit of mutual distrust between private equity and the big institutions.”

Proceeds of the flotation will be used to bring down Merlin’s debt of £1.3bn.  Major private equity shareholders CVC (brought in after the aborted IPO in 2010) and Blackstone will also be looking to bring down their shareholdings however, KIRKBI (owners of LEGO and LEGOLAND trademarks and 75% owners of the LEGO Group) has stated an intention to remain a "long term strategic shareholder" with a "significant shareholding."

thorpe park saw rollercoaster

Varney has commented on the IPO saying, ““Merlin Entertainments comes to the market with a consistent record of strong growth in both revenues and profits and bright prospects for the future. We have successfully followed a clear and proven strategy to build a high-growth international family entertainment business, built on strong brands and a portfolio of attractions balanced by geographies, products and demographics. Our very strong trading performance so far this year, with revenues over 11% ahead of 2012, is a further reflection of this.

“Delivering memorable experiences to our millions of visitors is our passion and we see a world of opportunity ahead of us. Our experienced team has the ability and ambition to deliver on our plans, as we develop our existing businesses and roll out Merlin’s unique portfolio of leisure brands internationally. The IPO will provide Merlin with the platform for our next stage of development and allow us to plan for the longer term. As such we are very excited about this next chapter of our story, and look forward to creating value for our shareholders and more magic for our customers.”

Merlin’s Growth

Merlin Entertainments Growth

Merlin has experienced meteoric growth over the last few years with a well-defined strategy which has been virtually unchanged since the growth drivers were set out in late 90s by Nick Varney:

1.    Growing the existing estate through planned capex cycles 
2.    Rolling out new midway attractions 
3.    Transforming theme parks into destination resorts 
4.    Exploiting strategic synergies 
5.    Developing new LEGOLAND parks 
6.    Strategic acquisitions

Merlin Entertainments Results 2012In an interview with Blooloop, David Bridgford, Merlin Entertainment’s Strategy Director, puts Merlin’s success down to a “relentless focus on the business” explaining that at its core, the strategy is “about developing a portfolio of strong brands and trying to make the business less volatile over time.”

Merlin’s brands include SEA LIFE, Madame Tussauds, The Dungeons, The Eye Brand, LEGOLAND Parks and LEGOLAND Discovery Centres, and the resort theme parks Alton Towers, Thorpe Park, Chessington World of Adventures, Warwick Castle, Gardaland and Heide Park.  

The Group has managed to achieve impressive returns on new investments with “average ROIC of over 20% on the roll out of Midway attractions and opening of a LEGOLAND Park in Florida”.  Merlin aims to open six or seven new midways and a theme park resort hotel a year.

Recently Merlin has been making inroads into the North American and Asia Pacific markets, rolling out midway attraction clusters in major cities (4 in China to date) and the anticipated LEGOLAND park openings in Dubai and Japan and South Korea.

Retaining Dynamism and Flair?

Merlin is characterised by a focus on the brands, maintaining a lower profile for the Merlin name itself.  With a relatively small head office and central costs and semi-autonomous attractions, will the change in ownership bring a change in culture?  How will the IPO affect Merlin’s ability to grow at current rates?

Mark Fisher, Merlin’s Chief Development Officer has said in an interview with Blooloop that his, “biggest fear for Merlin is that we become too ‘corporate’.”  

Similarly David Bridgford said, “We’re certainly not looking to change the culture of the organisation.  I think one of the things that we’ll have to work quite hard on is the issue of as you get bigger how you retain dynamism and flair?  

“We don’t really have a big company mentality so I don’t think you’ll ever be seeing big head offices, or a huge central team.  We will always need to be out there in front of our 54 million visitors because that’s where our business is done.”

storm surge water ride thorpe park

So the IPO will bring a spotlight on Merlin itself which should benefit in terms of brand recognition.  In addition, moving away from private equity owners with investment cycles of three to four years should help to secure long term funding for large theme park and LEGOLAND park investments.  Extending the offering to retail investors (minimum investment of £1000) with a discount for Merlin Annual Pass holders may also lead to guests engaging with the brand in a whole new way – as owners!

We close with another quote from Mark Fisher: “I’ve been asked before, “What is success for Merlin?”.  The answer is, it’s not about growing and selling the company, it’s about one day looking at this fabulous team that is rocking around the world and knowing you’ve been part of growing that.   It’s not about where we’ve been, it’s about where we’re going.”


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