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UK M&A trend continues as Black Sheep acquires Taylor Street

Latest acquisition follows wider consolidation trend across market leaders, mid-sized chains and specialist independents in the UK coffee shop segment

A branch of Taylor Street Baristas | Credit: Barney Livingston

London-based specialty coffee chain, Black Sheep Coffee, has announced it will acquire artisan coffee business, Taylor St Coffee. The acquisition comes as Black Sheep embarks on ambitious expansion plans for Europe, the US and the Middle East after receiving £13m investment in June 2019. Black Sheep currently operates 22 cafés and kiosks in the UK and a single site in the Philippine capital, Manila and is targeting a global portfolio of 70 stores by the end of the year. 

“We are pleased with the acquisition and are excited to welcome all Taylor Street staff as part of the Black Sheep family that every day is growing bigger and stronger. The Tolley siblings have built an incredible company over the years and we look forward to working closely together through this exciting time,” said Black Sheep co-founders Gabriel Shohet and Eirik Holth.

Founded in 2006 by siblings, Andrew, Nick and Laura Tolley, Taylor Street operates a wholesale business in addition to its cafés and opened a roastery in 2015. “With Black Sheep we feel that our shops are in the best hands possible, and we’re excited to be working with them to continue to deliver the kind of cafe experience our customers have long come to expect,” said Taylor Street co-founder Nick Tolley.

The acquisition is yet another example of consolidation in the UK coffee market, which has seen a flurry of M&A activity over the last 12 months. Major deals such as Coca-Cola’s £3.9bn acquisition of UK market leader, Costa Coffee, and JAB Holding’s £1.5bn acquisition of Pret A Manger, which acquired 90-strong high-street rival, EAT, in May 2019 have introduced unprecedented foreign investment into the UK branded coffee chain segment. In January 2019, the UK’s third-largest coffee chain, Caffè Nero grew its market share to 10% following the acquisition of a majority stake in Coffee#1, which has more than 90 stores.

The UK’s mid-size and independent operators have also under significant consolidation, with Department of Coffee and Social Affairs (DCSA) which has 25 UK sites and four in Chicago, USA, acquiring a string of UK independent cafes in 2018. These including three-strong London-based independent, Tap Coffee, three-strong Beas of Bloomsbury and single site Bristol-based specialty coffee shops, The Crazy Fox and Tradewind Espresso. In early 2019 DCSA, acquired Café 2 U, which has around 85 sites and Brighton-based specialty roaster, Small Batch Coffee Roasters, which also operates nine coffee shops along the south coast.

Elsewhere in the market, the collapse of Patisserie Valerie following a £40m accounting scandal in January 2019 led to dissolution of Patisserie Holdings' brand portfolio, which saw Irish private investment firm, Causeway Capital Partners, acquire coffee and bakery chain, BBs Bakers + Baristas’ 65 stores. Twenty-strong food-focused chain, Philpotts, was also bought by food retailer, wholesale and distribution company, A.F. Blakemore.

As smaller specialist chains seek further UK growth, crowd funding has also proved a lucrative method for expansion. In June 2018, London-based specialty coffee and wine bar concept, Notes Coffee, raised £1m to fund its expansion and now operates 10 sites. In August 2018 fellow London food-focused chain, Daisy Green raised £2m to grow its business and now operates 13 stores. In July 2018, specialty roaster and coffee shop Ozone Coffee Roasters acquire fellow specialty roaster, Hasbean.

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