Martyn Dawes founded Coffee Nation in the late nineties, using £300,000 of seed funding to road-test his idea of running a network of self-serve, gourmet coffee-to-go stations in supermarkets, service-stations and airports across the UK.
By 2000, he was ready to super-size the idea and attracted £4m from private-equity firm Primary Capital. Seven years on and Coffee Nation’s machines had been installed in more than 600 outlets, making £3m on sales of £20m.
In April 2008, the company was sold to Milestone Capital and its management team for £23m – which returned to the private equity house almost four times their investment.
The business changed hands again earlier this year when Whitbread/Costa paid almost £60m, rebranding it as Costa Express.
The sale of Coffee Nation has given Dawes a war chest to acquire a company himself. He is also backed by a £10m fund managed by Clearwater, a mid-market corporate finance firm. A number of private equity firms are also keen to back him on larger deals.
“Letting go of Coffee Nation was quite an emotional wrench,” admits Dawes. “I spent time traveling – I went on a number of adventures, including climbing Mount Kilimanjaro and racing up Mount Kinabalu in Borneo. Then I began to think, ‘What next’? I was 40 when I exited the business. I always knew there would be something else beyond Coffee Nation.”
Rather than start another business from scratch, this time Dawes wants to buy an established company.
“There are thousands of companies in the UK making between £1m and £4m EBITDA. Not all of these have genuine growth potential. But with the right combination of professional leadership, funding structure and vision, there are those that could be stellar performers,” he says.
Dawes is looking to invest in or acquire a UK-based consumer-facing business with a turnover of £10m to £20m: “I’ll be asking myself five main questions about the business: Is it in a growth sector? Is it already or could it become market leader in its sector? Does it operate within a large addressable market? Is it scaleable? Does it play to a long-term trend?”
It boils down to growth potential, says Dawes. “It could be a young growth company perhaps where the founder is questioning whether he or she is right to take the business to the next level, a successful company constrained by its current ownership structure, a business with shareholders who wish to retire or a great business operating with the wrong business model.
“I’ll have serious skin in the game. This will be a full-time role for me. I’ve been around the block with the private-equity guys and I have the experience and contacts to take another business to the next level. I want to buy a great small business and turn it into one of Britain’s great mid-size companies.”
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