The acquisition battle for LBM (London Bagel Museum), a famous bakery brand, is underway, with industry opinions divided over its expected valuation of 300 billion won. London Bagel Museum recorded a revenue of 80 billion won last year from its six directly operated stores. However, there are also skeptical views regarding it being a food and beverage (F&B) brand with limited scalability.
According to the retail and investment banking industry on the 20th, LBM (London Bagel Museum) is pursuing investment of about 300 billion won corresponding to its corporate value (100% equity). While LBM has stated that it is seeking investment rather than selling management rights, the prevailing view in the market is that it is effectively a sale.
LBM is a corporation that operates multiple F&B brands, including Highwest Cafe, Layered Cafe, and London Bagel Museum. It was founded by Chief Brand Officer Lee Hyo-jung.
The company started under the corporate name 'London Bagel Museum Anguk' in February 2022 and later changed it to LBM, the abbreviation for London Bagel Museum.
Starting with the Anguk location in Seoul in 2021, London Bagel Museum currently has a total of six locations in Korea, including locations in Dosan, Jamshil, and Jeju. LBM quickly increased brand awareness through the planning of emotional spaces and a location strategy centered on limited regions. LBM selected Bank of America (BofA) as the lead underwriter for its sale and has been in contact with multiple private equity firms while pursuing the sale of management rights.
What the industry is paying attention to is the high valuation of London Bagel Museum. In the recent mergers and acquisitions (M&A) market, high domestic reliance and rapid trend changes often lead to conservative valuations for F&B products. Typically, a multiple of 5 to 7 times is applied, but for LBM to be recognized at its desired corporate value, a multiple of about 11 times based on last year's earnings before interest, taxes, depreciation, and amortization (EBITDA) would need to be applied. Nevertheless, what makes LBM assert a value of 300 billion won?
First of all, LBM proved the company's profitability with its first performance disclosure. Last year, LBM's revenue and operating profit were 79.6 billion won and 24.3 billion won, respectively, representing increases of 121.1% and 91.3% compared to the previous year. During the same period, net income also rose sharply by 80.5% to record 20.4 billion won.
Last year, the company's EBITDA was 27.1 billion won, with an EBITDA margin of 34%. The gross profit margin was 61%, and the operating profit margin exceeded 30%. The industry evaluates that F&B brands showing this level of profitability are rare.
Another reason is the loyal fan base and strong brand influence. LBM has created a 'queueing store' without celebrity models or large-scale advertising. Founder Lee Hyo-jung's active brand management has generated stable demand centered around an Instagram-based fandom. This creates an efficient structure with low customer acquisition expenses.
However, there is also a prevailing view in the industry that it is difficult for LBM to be recognized at its desired corporate value of 300 billion won. The common perception is that for an F&B brand to be acknowledged with a high corporate valuation, external market entry and expansion of store numbers to achieve scale growth must be supported.
However, as demonstrated by the popular bakery Seongshimdang in Daejeon, there are counterexamples where even having stores in only a single city can achieve national brand loyalty and symbolism. Last year, Seongshimdang's operating company, Rosso, recorded a revenue of 193.76 billion won, a 56% surge compared to the previous year (124.3 billion won). Although it is a single-brand bakery, its operating profit exceeds that of CJ Foodville, which operates Tous Les Jours.
Like Seongshimdang, London Bagel Museum operates only a few directly managed stores without franchises. Seongshimdang operates all six of its stores in the Daejeon area as directly managed stores. London Bagel Museum also currently operates only six stores as directly managed stores and does not easily enter large retail companies like Shinsegae and Hyundai Department Store, despite receiving 'love calls.'
The admission of the Lotte World Tower in Jamsil and Starfield in Suwon is an exceptional case. This is due to the judgment that excessive expansion could harm brand scarcity and 'hip sensibility.' In fact, the donut brand 'Noted,' which opened in 2017, experienced customer attrition and a decline in sales following rapid store expansion. Additionally, by focusing on direct management, LBM has created a structure that maintains brand control while managing expenses such as labor costs and rent.
An industry official noted, 'I understand that LBM recently entered the final adjustments to select a preferred negotiator,' adding, 'While profitability and brand loyalty are clearly strengths, how to implement a value-up strategy in a structure with limited capacity for outer expansion will be a key issue in this transaction.'