Korea-focused IMM Private Equity has acquired a majority stake in Holly’s Coffee, a Korean coffee shop franchise, according to a company statement.
The firm expects its total investment in the company, after add-on investments, to reach about $100 million, with the entry valuation at about 6x EBITDA.
IMM plans to expand Holly’s in Korea, as well as in China and Southeast Asia where the business already has some stores. Its core strategy is to improve the company’s brand and image, while maximising profits through its franchise model.
Holly's Coffee enjoying exponential
The firm outlined Holly’s strong growth potential as a key motivation behind the investment. The firm said in the statement, “Holly's Coffee is a Korean home-grown coffee franchise brand which has achieved annual revenue growth rate of 35 percent as well as the industry’s top-tier operating margin of 10-15 percent over the past 4-5 years.”
Korea’s coffee industry has also grown at an average rate of 30 percent per year for the past 10 years providing great opportunity for growth-focused private equity firms, according to IMM.
It said, “Although we expect growth of the Korean coffee franchise industry to slow down somewhat, [the] industry is expected to maintain an annual growth rate of 10-15 percent going forward as a result of steady increase in per capita coffee consumption in Korea, as well as a high demand for operating franchise stores by young- and retirement-age demographic groups.”
IMM Private Equity is a Seoul-based independent private equity firm founded in 2001 which has $1.5 billion in assets under management. In December 2012, it closed Fund II oversubscribed on $700 million, according to the firm.