A Big Idea, but is it a big mistake?

A Big Idea is back in circulation. It's called Consolidation of the High Street.

It was back in 2005 that Mark Jones, then running the Yates's wine-lodge business, suggested publicly that the smaller high-street pub companies should be merged. Someone was listening, as it turned out.

Property entrepreneur Robbie Tchenguiz loved the idea and set about using Icelandic cash to lump the Yates's business, the still-breathing remnants of SFI Group and Laurel's high-street segment together under the Laurel banner. We know the outcome — administration for Laurel Pub Company a few years later.

It's tricky to claim the idea was definitively a stinker from the start. Tchenguiz divided up the freehold property and operating company interests in an edgy and then-fashionable business model known as propco/opco. The operating company quickly came to creak like a ship caught in the vice-like grip of an Arctic ice sheet as winter approaches. It found its rents ratcheting up year by year — only turbo-charged sales growth and profit conversion would have kept the ship moving forward.

The subsequent performance of Town & City Pub Company — containing Yates's and a host of unbranded sites — since it emerged from the Laurel administration shows it's perfectly possible to out-perform on the high street given good-quality management and an even keel on the rent regime.

But the story at Town & City has been about operational focus, rather than large-scale mergers and integration. Now Town & City chairman Ian Payne is suggesting that Mitchells & Butlers' 333 wet-led pubs, recently acquired by private equity firm TDR Capital, would make an excellent fit with Town & City in what amounts to Consolidation of the High Street, Part Two.

Some will argue that this could be totally different from the Laurel debacle. There's much more freehold property in the M&B wet-led estate (and TDR Capital is likely to be advised that propco/opco has just not worked in the pub sector); average sales are a healthy £14,000 per week per pub, and there's a host of still-strong brands in the M&B cast-offs (Goose, It's a Scream) that could drive the larger estate post-merger.

This argument is also underpinned by the simple fact that high-street investment is at an all-time low — and it's now the suburban food market that is seeing the over-investment of capital that resulted in casualties on the circuit a decade ago.

Thing is, I don't buy it. For starters, throwing two estates together causes 18 months of integration indigestion where too much management time is taken up on stuff like integrating IT systems. Moreover, there are common-sense arguments against it. The history of sustainable growth on the high street is a slim tome with the letters JDW down the spine and only two chapters: Organic Growth and Hand-picking Sites.