MM Private Equity (IMM PE) has restarted a move to sell South Korea’s Hollys F&B, which operates the coffee brand Hollys Coffee.

Goldman Sachs, acting as a financial adviser to IMM PE, has begun receiving non-binding offers for the coffee chain from potential buyers with the expected deadline at the end of this month, sources familiar with the situation said on May 15.

After opening its first store in the Gangnam district in 1998, the country’s first coffee chain has grown to more than 500 stores nationwide of which about 20 percent are operated directly by the company.

Besides its efforts to boost sales by customizing stores for different consumer behaviors in various commercial areas, Hollys F&B has released several products, such as planners and camping equipment for its customers. This is a practice which has become a popular marketing strategy among coffee chains in Korea.

As a result, Hollys F&B’s financial results for 2019 reveal growth and cash generation. Revenue rose by 6.5 percent year-on-year to 164.9 billion won ($133.9 million), while earnings before interest, tax, depreciation and amortization (EBITDA) increased 1.8 times year-on-year to 47.3 billion won. IMM PE’s renewed attempt to sell the company appears to be based on this improved financial performance, industry watchers said.

After acquiring Hollys F&B in 2013, IMM PE made partial exits through recapitalizations which led to distributions worth all of the capital invested in the coffee chain going to its investors. So to generate a higher internal rate of return the firm will likely put its focus on selling the company at the highest possible price.

While IMM PE has continued to negotiate with potential buyers it didn’t come close to agreeing on the company, industry watchers said.

The latest deals in the country’s food and beverage (F&B) sector include Unison Capital’s sale of Gong Cha Korea for 350 billion won, which was equivalent to a multiple of 10.9 times the bubble tea chain’s 2019 EBITDA. If this valuation multiple is applied to Hollys F&B, the expected price for the company would be 473 billion won.

But unlike Gong Cha with its footprints not only in Korea but also Taiwan and Japan, Hollys F&B generates most of its revenue from the domestic market. Concerns about the economic fallout from the COVID-19 pandemic are also partly overshadowing the company’s improved financial results. So a fair multiple to pay for Hollys F&B is estimated somewhere between 5 and 6 times, some market watchers said.

“After the Gong Cha deal, sellers in the M&A market are putting a higher valuation on F&B companies,” an industry insider said. “Reaching an agreement on [Hollys F&B’s] valuation between the seller and prospective buyers would be the key to a successful sale of the company.”

(Reporting by Ar-rum Rho and Ik-hwan Choi)