With the end of the pandemic in sight, now is the time to get a business bargain

OMG, if only I had some spare. Has there ever been a better time for bottom-feeding, for picking up a bargain?

There I was, trawling the business news, and this jumped out: Deltic, the UK’s largest nightclub operator, has been bought by the Scandinavian nightlife group Rekom for £10m. That has to be one brilliant coup. Deltic has 52 sites, and the group includes the popular Oceana, Pryzm and Atik student club and bar brands.

Yes, all its venues are closed at the moment and they’ve been that way since March last year (nightclubs and lap-dancing clubs are the only two sorts of premises that have not been permitted to reopen, even between lockdowns); yes, it was in administration with just £896,400 in cash left in the bank and burning through £1m a month while everything remained shuttered. But, my goodness, this was a business that was worth £80m before the pandemic.

Rekom is buying 42 of the 52 clubs and will be covering £700,000 a month in losses while the new acquisitions stay closed. It’s taking on 1,466 employees (150 from the locations they don’t want are being made redundant). The new owner is in the industry – Rekom operates 137 clubs across Denmark, Finland and Norway – and saw off interest from Greybull, the private equity group, bar operator Shoreditch Bar Group, and Deltic’s existing shareholders.

Adam Falbert, Rekom’s chief executive, said the company has been “looking at the UK market for the past few years as part of our ambition to become one of the largest pan-European nightlife groups”. He added: “When the opportunity came to take over a strong and well-run group like Deltic, it was a question of finding the right set-up to make it happen.”

Deltic’s chief executive, Peter Marks, is keeping his job. Not for nothing did he describe the sale as “crazy”, though. Heavens, can it really be the case that the outbreak of coronavirus, forcing a total closure for what will almost certainly be more or less 12 months (they did reopen some clubs but only as bars), wiped off all that value? This, don’t forget, is a business that was built up over years. Along comes the virus and it vanishes, just like that. How does that work?

The answer, of course, is that it doesn’t, and that Rekom has got itself one hell of a buy. Before the pandemic, Deltic had been undergoing a strategic overhaul after its new drinking, dining and club brand Eden failed to take off with customers. According to the most recent accounts, for the year ending February 2019, underlying earnings before interest, tax, depreciation and amortisation declined by 30 per cent to £11.1m on turnover of £101.8m.

By April (please, let it be April) or whenever restrictions are at last lifted, those bars and dance floors will be heaving like never before, with young clubbers desperate to go out again, and able, in many cases, to spend savings that have been accumulating over the past year. 

Rekom will recover that outlay in no time at all, and Deltic will very quickly command an £80m price tag again, or higher.

There will be countless other businesses like Deltic: doing well before, now going for a song. Lots of enterprises aren’t salvageable. Those that were battling threats to their models before the pandemic, and have seen those forces accelerate with the shutdowns, probably can’t – and let’s face it, shouldn’t – be saved. There are plenty, however, that were in fine fettle, and will have simply endured a year without earnings. They’re in markets that will bounce back – in the case of Deltic, students are going to carry on behaving, and spending, as students.

It’s always puzzled me that from the moment Boris Johnson announced the first lockdown last March, lots of bosses, and to be fair, commentators, threw in the towel. Businesses that had appeared in decent shape before barring their doors declared it would be game over, that they could not go on. Fair enough: they had overheads in rent and wages to pay; they may have had borrowings. But all of them?

It was as if we were collectively overcome with short-termism, that we found it impossible to see beyond the end of a temporary hiatus, that we could not imagine the emergency would ever end. What was especially galling and shaming were those firms that had no financial cover, that often had expanded too far, too quickly, and in some instances had been making chunky payouts to their shareholders and not putting enough aside for a rainy day. Watch in the next few weeks – with the end in sight and would-be buyers able to make a more definite calculation as to the final tally, and to when business will pick up again – for more deals like Deltic’s.

One successful entrepreneur, who I know is sitting on a pile of cash and is one of the shrewdest commercial brains around, sent me a new year text, wishing me well for 2021, adding, “Great opportunities to be had.” He ended with the flexed biceps emoji. How I wish.