If there’s one thing that’s been made clear through the COVID-19 pandemic, it’s that us Brits love our pubs. Closing pubs has been one of the toughest decisions the government had to make in 2020. This was because of the economic impact, of course, but also because of the impact on the British public and the freedoms that they value the most.
And it was this passion for pubs that resulted in an impressive recovery for the pub sector when they did finally reopen in late spring 2020. However, a second national lockdown, extending well into 2021, saw off a number of smaller, independently owned pubs. These have become easy prey for the major players in the UK pub industry, who are now busy picking off these vulnerable assets. They hope that, in 2021, we will finally see the back of the pandemic and British pub-goers can get back to doing what they do best: spending money in the pub.
Bargains to be had for those with cash to spend
2020 was a year like no other in the hospitality sector. Pub owners have taken many different approaches when responding to the challenges of the pandemic. Some dug their heels in and out everything into surviving the lockdowns and extended closures. Others have decided to sell to very willing buyers with deep pockets.
It’s a somewhat tragic situation when a pub owner has a perfectly viable pub business, but is forced to part with their beloved business having simply run out of money and support. Larger pub companies then come along and snap up a great little business in the hope of making it even more profitable when normality is returned.
But there have been challenges for buyers…
Despite it being a buyer’s market on the face of it all, those looking to acquire pub businesses have been faced with rather uncharted territory when making deals over the past 12 months. Firstly, there are limits on travel and personal contact to contend with, which makes dealmaking a rather impersonal, remote activity with less scope for thorough due diligence. Then there’s the unpredictable nature of the pandemic and the outlook for the hospitality sector as a whole.
However, it’s fair to say that the government is expected to return our freedoms and our ability to use pubs and restaurants as soon as possible. Recent figures regarding the value of the hospitality sector to the economy as a whole underline this. The latest figures from the Office for National Statistics (ONS), published in mid-January 2021, show that the UK economy shrunk by 2.6 per cent in November 2020, with the hospitality sector accounting for nearly a third of that decline.
These figures led to even greater pressure from the sector, to re-open as soon as possible, once the most vulnerable groups have been vaccinated. And this increasing pressure will further boost the momentum in the UK pub M&A market.
Pubco big names making private equity-backed deals in 2021
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