Back to Investments Overview

Espresso House

Espresso House

Invested:
January 2006

Exited:
September 2012

Return:
3.4x / 22% IRR

Sector:
Leisure and retail

Headquarters:
Malmö, Sweden

Region:
Scandinavia

Business:
Branded coffee bars

< back to portfolio overview

Business at time of investment

Espresso House was a small but leading coffee bar chain, with 22 sites, 200 employees and a strong market position in the southern Malmö/Lund region.

Investment rationale

The branded coffee bar phenomenon, which experienced extraordinary growth in the US and UK, had yet to mature in continental Europe. Palamon was looking across Europe for an entry point and identified Sweden, which consumed almost four times more coffee than the UK per capita, and yet but with a very low penetration of branded coffee bars. Palamon could see the opportunity to build Espresso house into the leading Scandinavian coffee bar chain with over 100 units in Sweden.

Value creation

  • Building out management team: Brought in a high calibre senior management team to execute expansion plans
  • Bolt-on acquisition: Acquired the second largest Swedish branded coffee chain, Coffee Cup in April 2006 adding 15 outlets
  • Infrastructure for roll-out strategy: Provided equity and arranged a debt package to fund the roll-out, bolstered expansion team and developed a scaleable regional management infrastructure.
  • Roll-out: Built out business model until run-rate of 20 new openings per year achieved and 122 sites had been opened.
  • Focus on quality: Created a leading Swedish consumer/leisure brand, with a high quality site concept, a differentiated product range and an excellent customer service ethos.

Company at exit

Espresso House was by far the leading coffee chain in the Nordic region with 122 outlets in Sweden and a nascent presence in Norway. The company achieved compound annual growth rates of 31% in revenue and 41% in profitability during Palamon’s ownership and employed 1,300 staff.

Result

On 27 September 2012Palamon sold its shareholding in Espresso House to Herkules Kapital. The transaction generated a 3.4x return on invested capital and 22% IRR.


Espresso House


“Palamon’s support and strategic insights were significant at the early stages and then throughout the roll-out of our expansion plans. We have greatly appreciated our close collaboration with the Palamon team which has been an essential component in the Company’s success.”
Adiano Capoferro, CEO of Espresso House