The Big Interview: Jim Fallon

By Phil Mellows

- Last updated on GMT

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The Big Interview: Jim Fallon
He was the banker who funded Enterprise Inns as it grew to be the biggest pub company in the country. He advised on, backed and brokered countless deals during the industry’s M&A heyday.

In short, he was a key actor, protagonist even, in the two-decade drama that has shaped the pub sector we know today.

But Jim Fallon’s role was a backstage one.

When he steps out of the shadows to reveal himself at his own bar, Covent Garden’s beer café Lowlander, he appears a slight, shy, amiable, ordinary sort of chap.

Unimposing would be the word, and of course Fallon’s success lies in his ability to move swiftly and silently behind the scenes without drawing attention to himself.

He was a late starter in the finance game. He’d already spent eight years as an electrical engineer when he came down to London from Yorkshire in 1991 to join Midland Bank, now HSBC, on the team funding mergers and acquisitions.

“It was a recessionary period and a good time to learn,” he says.

He seized an opportunity to take over the bank’s pubs department — “the pub sector is fascinating. It’s something you can look at and touch” — and soon encountered Ted Tuppen, who at that time had only 360 pubs in his Enterprise empire.

His first deal was Enterprise’s purchase of the 413-strong John Labatt estate, and in the same year he worked on the buyout of Pubmaster from Brent Walker.

“From there I got heavily involved in the pub sector. I did eight deals with Ted,” he says wistfully. “I grew with that business and it was great fun in those days.”

The feeling may have been mutual. Enterprise became Fallon’s first client when he moved out of lending to the advisory side, first setting up a team at HSBC and then his own company, McQueen.

By then the contacts he’d made meant he could initiate some deals himself.

“I’m a sector-funding person and I have to know everyone and know what’s going on,” he explains.

“So when Wolves bought Burtonwood in 2004 I knew what was going on in Burtonwood’s mind and I knew there was a good chance it would sell, but it would want a quiet deal behind closed doors.

“I knew Ralph Findlay [then Wolves’s chief executive] well and regularly took ideas and thoughts to him. So I approached him. It was completely my idea.

“But the implementation of the deal was the most important thing. We had to move quickly because we didn’t want to upset the Burtonwood employees. I’d already been round the estate, we did the due diligence in a week and I talked to shareholders.

“So it was a done deal when it was announced — and that annoyed people like Greene King, which would have been interested.

“It was the same with the Fuller’s takeover of Gale’s, although that was a longer burn. If my job’s done properly it should be a surprise.”

In 2008 he left McQueen to set up Graybridge where he’s “doing some advisory work, some strategic reviews”.

The office is above Lowlander, enabling him to take a closer interest in the running of the bar he bought out of administration in 2009.

“I’ve actually been involved in Lowlander since it opened in 2001, but I’m a lot more hands-on now. It needed focus and a lot of capex back-of-house, and I put in most of the money.

“It’s a great opportunity to see what’s going on from the inside and it’s given me a better understanding of what operators go through every day. It’s good to have an operational understanding — but I wouldn’t do it if I didn’t enjoy it.”

And last year Fallon joined the board of Eclectic Bars, which has 16 sites around the country, including the Po Na Na and Sakura brands.

He clearly has confidence in the future of the sector and believes there are opportunities. But he’s realistic too.

“I read with interest the Coffer Peach Business Tracker figures that show the managed chains are growing month-on-month — but I don’t believe them. Trading is incredibly tough and costs are going up.”

And even for the right operation, it’s hard finding funding.

“Banks will not lend to this sector. They’re not interested in whether a business is good or not, they just see a sector that in the past has lost them a lot of money, and it will be like that for a long time. In 2009 I said it would be five years, and I still think the same. I was there in the 1990s and this is as bad, if not worse.

“I can’t see any let-up in pubs closing,” he goes on. “The economics are getting more difficult. But in many ways that’s a good thing. There’s an over-capacity in the market.”

'Too big'

He admits that Enterprise, the company he helped build, “got too big”. “It had too much debt and that became a straitjacket. It couldn’t do much except service debt.

“Pubcos extracted too much profit from tenants to pay interest costs, and now they’re introducing free-of-tie deals to keep good people. They’ve realised it’s a tenant-driven business. It will be interesting to see how regional brewers adapt to that.

“I wonder now whether the optimum size for a pubco is in the hundreds rather than the thousands,”

he adds. “Ted always said you should never have more than eight people reporting into you, and the bigger a company gets the more complicated that is to achieve. A business needs to be as simple as you can keep it.”

The pubcos’ stampede for sites was fuelled by the willingness of banks to lend pretty much whatever they asked for. A consequence of that, Fallon believes, is that they paid too much.

“Prices were driven by what they could borrow rather than the fundamental value of a pub. That’s why it all went wrong. Pubcos were consuming cash rather than generating it.

“There’s no sales-driven solution now. Companies are going to have to take costs out and make some difficult decisions. They’ve only just started to do that, selling at low prices businesses they wouldn’t write off before because it would hit the balance sheets.”

Another problem, on the managed-house side of the industry, was the propco-opco model — or the splitting of property owning from pub and bar operating.

“The rents the property company charged went up every year, but cashflows didn’t go up with them. I said at the time that sooner or later the opcos would go bust — and they all did. It was very predictable but nobody believed it. It was the banks’ money so they didn’t care.

“It’s a tarnished sector now as far as the banks are concerned,” Fallon concludes. “But the beauty of the pub industry is that it’s full of entrepreneurs with a positive attitude.

"And if you’ve got money you can buy single sites and small groups for knock-down prices.”

He is himself in the market to expand Newman Bars, the firm he set up to operate Lowlander.

Though, as you might guess, he’s wary of overpaying.


“And I still want to be involved in company strategy, doing deals. There’s a lot of scope for that, it’s a good time for businesses to reassess their strategy — and I’m always for hire!”

My kind of pub

“For me, it’s either a bar like Lowlander [above], with the beer and food experience and the table service, or a nice country
pub with good real ale and a good food offering.

“The Bull Hotel, where I live in Fairford, Gloucestershire, is very nice. It’s an Arkell’s pub with a lovely atmosphere.”

Key dates

Jim Fallon begins his career as an electrical engineer at ICI’s Huddersfield plant

Joins Midland Bank, now HSBC

Starts to specialise in lending to the leisure sector

Completes his first pubs deal — Enterprise Inns’ purchase of John Labatt from Interbrew

Backs Wolverhampton & Dudley’s bid for Marston’s

Takes an interest in Lowlander

Sets up corporate finance advisory business McQueen

Initiates Wolves’s purchase of Burtonwood

Advises on Fuller’s takeover of Gale’s

Leaves McQueen to found Graybridge consultancy. Launches Newman Bars

Buys Lowlander out of administration

Joins board of Eclectic Bars

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