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Make mine a Costa Coffee – how acquisition can transform a business

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The Whitbread Group owns Premier Inns, Brewers Fayre, Whitbread Inns and Beefeater. But it has seen its revenues boosted by one key division. At Costa Coffee, like-for-like sales are rising ahead of the group’s other brands.

Whitbread acquired Costa for a reported £23m in 1995. It was a complementary (and perhaps slightly leftfield) acquisition for a group built on brewing and hospitality. But we can all see the reasoning. If you sell beer, and you sell food… why not coffee?

Whitbread saw that Costa had huge potential. Back then, Costa was a pretty big business, but it was miles off the high-profile, high street success story it is today.

Whitbread has overseen massive growth. In 1995, Costa operated 41 UK stores. Today, the business has 68-times that number: 2,800 outlets in 30 countries, with another 250 stores planned for 2016-7 alone. In 2015, Costa’s turnover was £950m.

Why am I telling you this? Because it demonstrates exactly this kind of long-term strategic thinking that underpins the acquisition of many of our SME clients. Acquisition can bring something new, more strings to the bow. And the right acquirer can scale your business dramatically.

Acquirers buy because they see potential in businesses that have carved a clear niche, have a specialist skillset, loyal customers, and a great name. This makes the right acquisition as exciting for an acquirer as it is for a seller.

Take the Aurum Group – owners of luxury jewellery brands Goldsmith’s and Mappin & Webb. They acquired BCMS client The WATCH Lab, a specialist watch repair chain, earlier this year. And as Brian Duffy, CEO of Aurum Group, put it: “We are thrilled to acquire The WATCH Lab… this is a perfect addition to our growing portfolio of outstanding retail brands.”

Whitbread bought Costa and Aurum bought The WATCH Lab for essentially the same forward-thinking reason: the potential to grow under their ownership. This is what acquisition should be about – focusing on the future, and taking a great business to the next level.

And that, as Brian Duffy says, can be thrilling.

 

Dave Rebbettes's picture
Posted Jun 2016
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