About private equity

How private equity invests in privately-owned businesses, supports jobs and creates prosperity.

Members

Login to access your exclusive member-only content and account information.

Login

Not a member? Join us

  • Operate to the highest level of professional standards
  • Access authoritative industry research and data
  • Navigate the complex EU regulatory environment
  • Network and engage with industry leaders
News & opinion
Opinion
Share

Private equity investment leaves coffee firm full of beans

12 Dec 2012

Private equity investment left self service machine company Coffee Nation full of beans! Milestone Capital Partners’ three year investment got the firm buzzing with revenues jumping by 55 percent, staff numbers growing by almost half (48 percent) and vending location sites almost doubling before they finally sold to UK giant Costa Coffee. In the last of our series profiling winners of their recent Operational Excellence Awards, Private Equity International describes how they managed to make a great return for their investors and leave behind a bigger and better business.

Between Milestone Capital Partners’ initial investment in Coffee Nation in March 2008 and the company’s sale just three years later to coffee-house chain Costa Coffee, it doubled its earnings before interest, taxes, depreciation, and amortisation (or EBITDA)  to €7.4 million (£5.9 million).

The provider of gourmet coffee vending machines also grew top-line revenues by 55 percent in the same period to £25 million. And it increased its number of vending location sites – from 552 at the management buyout to about 900 at exit – as well as boosting staff by 48 percent.

“There was very impressive growth of revenue during those three years and an even more impressive growth in EBITDA,” said judge Thomas Pütter. “That is a clear indication that they have not only grown the size of the business but they’ve made it into a better margin business and they’ve done it by growing staff, which means they’ve really got productivity up. I found that quite compelling,” said Pütter, who added the 3.7x exit multiple was also impressive. “And there was clearly heavy involvement by the private equity firm.”

Under Milestone’s watch, Coffee Nation grew its supplier base into a global operation with cups and lids sourced from China, coffee machines from the US and Switzerland and coffee beans from South America.

Milestone also refocused product development by ending Coffee Nation’s development of its own machines and outsourcing to a third party, which led to substantial cost savings. The resulting machine held on to the same functionality as its predecessor but also improved performance with increased milk capacity and touch screens. In tandem, Milestone developed a new self-service “vend” offering – previously customers would have had to pay at the counter – which allowed for expansion into new markets like universities and offices.

Those were among the most important operational levers pulled, say Colin Granger and Philip Conboy, the Milestone partners who led the deal. “Telemetry attached to each coffee machine allowed the performance of the machine to be managed from head office and significantly lowered machine downtime as faults could be identified and dealt with in a timely manner,” they said. “This also allowed us to monitor buying patterns such as when the machine was likely to be at its busiest, what drinks the consumers were buying and when the machine was last cleaned.”

They’d realised from the outset that the opportunity was “huge” for Coffee Nation because “there were no other real competitors and there was a move towards ‘on-the-go’ solutions”.

A focus on management was also a factor in the growth of Coffee Nation. Granger and Conboy noted that they “backed a proven management team that understood the sector and the market opportunity.” Milestone also recruited a second tier of management including a sales director, operations director, financial controller and marketing manager – all of which proved key in winning new business.

EBITDA growth

110%

Top-line revenue growth

55%

Employment growth

48%

To find out more about PEI’s Operational Excellence Awards, click here.

James Crisp, Media Manager, EVCA

Want to discuss?

We are always keen to hear from you.

Share

What can I do to manage cookies stored on my computer or phone?

You can accept or refuse cookies. Accepting cookies is usually the best way to make sure you get the best from a website.

Most PCs automatically accept them but you can change your browser settings to restrict, block or delete cookies if you want. Each browser is different, so check the 'Help' menu of your particular browser (or your mobile phone's handset manual) to learn how to change your cookie preferences. Many browsers have universal privacy settings for you to choose from.

Help on how to set and customise your cookie settings for your browser

How to manage cookies in Internet Explorer

Cookie settings in most versions of Internet Explorer can be found by clicking the tools option and then the privacy tab.

How to manage cookies in Firefox

Cookie settings in Firefox are managed in the Options window's Privacy panel. See Options window - Privacy Panel for information on these settings.

How to manage cookies in Chrome

Click on the spanner icon on the toolbar, select settings, click the under the bonnet tab, click on content settings in the privacy section.

How to manage cookies in Opera 

You can manage cookies in Opera if you Click on settings, then Preferences, then Advanced and finally Cookies

How to manage cookies in Safari

Choose Safari, then preferences and then click security. You should then be able to specify if and when Safari should accept cookies.

To manage cookies on your mobile phone please consult your manual or handbook.

Get more help about how cookies work with specific browsers.

What happens if I don't accept cookies?

If you decline cookies, some aspects of Invest Europe site may not work on your computer or mobile phone and you may not be able to access areas you want on the website. For this reason we recommend that you accept cookies.

What happens if I delete my cookies?

If you delete all your cookies you will have to update your preferences with us again and some aspects of our site may not work.

What happens if I change computers or mobile?

If you use a different device, computer profile or browser you will have to tell us your preferences again.

If you'd like to learn more about cookies in general and how to manage them, visit aboutcookies.org.

We can't be responsible for the content of external websites.

Opt-out of cookies

Login

Join today

This is for members only. To view in full login or join Invest Europe today.