The year started with money flowing into influencer-backed concepts and clean beauty brands, but for now the market for deals has come to a screeching halt—for the moment, with few deals happening. It looks as if most, if not all, of Q2 will suffer the same fate; however, many experts predict that once COVID-19 lockdowns start to ease, activity will pick up, with private equity firms and vulture funds with cash looking to capitalize on lower multiples. Our top 5 notable transactions from the first quarter of 2020 are below. Read the full article on BeautyMatter here.
Creed family sells 260-year-old fragrance brand to blackrock ltpc
BlackRock’s Long Term Private Capital is acquiring a majority stake in the fragrance company from Olivier Creed, after more than 260 years under family ownership, for an undisclosed amount.
WHO: Creed was established in 1760, first as a tailoring house, and later a fragrance house, producing more than 200 perfumes, including the cult fragrance Aventus, Viking, Himalaya, and Green Irish Tweed. Based in Paris, with a factory in nearby Fontainebleau, Creed manufactures many of its own essences using a traditional infusion technique that enables Creed to maintain the quality and authenticity of its fragrances.
LTPC is backed by the investment firm BlackRock Inc., the world’s largest money manager that started the private equity fund in 2018 with the goal of raising $12 billion to buy all or part of companies. LTPC is part of BlackRock’s effort to build up its business in alternative assets.
Javier Ferrán is Chairman of Diageo and spent more than 20 years at Bacardi, ultimately serving as President and Chief Executive Officer. He was previously President of Bacardi EMEA and serves on the board of directors of companies including Coca-Cola European Partners.
WHY: The acquisition fits LTPC’s model of scouting for family-owned businesses and pursuing long-term themes such as demographics and millennial spending patterns. LTPC’s managers are willing to hold investments for longer than a period of three to five years that’s typical with buyout funds.
IN THEIR OWN WORDS: “In the next three to five years, we have a clear strategy to grow and expand the business, but with a real focus on preserving and enhancing the great history and heritage of Creed,” Dag Skattum, head of the European office at LTPC, said in a statement.
Olivier Creed, a direct descendant of James Henry Creed, who founded the original business during the reign of King George III of England, said to WWD that, given the perfumer’s history, “it was critical that, when the time was right, I was able to choose the best partners who would be able to maintain our heritage as a luxury family business while helping us reach more people around the world.”
He added that Ferrán and BlackRock LTPC were “ideal partners for Creed, given their collaborative approach to working with their companies and their long-term orientation. I also look forward to continuing to work with all our staff, suppliers and distributors, and I know that they will continue to share in our success.”
Creed added that Ferrán’s “leadership experience in the family-owned luxury sector, as well as the financial support of a new majority investor with long-term DNA, will ensure that [the brand] can continue to develop and produce the world’s greatest scents.”
- Creed Fragrances has been sold to BlackRock Long Term Private Capital.
- Javier Ferrán, the Spanish businessman and chairman of drinks giant Diageo Plc, will become chairman and an investor in Creed as part of the deal.
- The terms of the deal were not disclosed.
- According to WWD, industry sources estimate that Creed’s revenues are in excess of $200 million. Men’s fragrances make up about 70% of Creed’s business, and the house has been working on increasing its women’s fragrance division to account for 35 to 40%.
- Olivier Creed, the sixth-generation owner of the company, will remain master perfumer while Ferrán will become chairman of the company’s board of directors. Creed’s son, Erwin Creed, will also remain involved in the business.
- Michel Dyens & Co. acted as the exclusive financial adviser to Creed.
- LTPC struck its first deal in 2019, backing Authentic Brands Group, which recently snapped up Barneys New York and Forever 21.
E.L.F. makes first acquisition with w3ll people deal
e.l.f. Beauty has made its first acquisition, snapping up clean beauty brand W3LL People for $27 million.
WHO: W3LL People was launched in 2008 by James Walker, Shirley Pinkson, and Dr. Renee Snyder to provide high-quality, clean cosmetics. The company is cruelty-free, and its plant-based product-line—which contains no fillers, propylene glycol, petrochemicals, or petroleum byproducts—includes 40 EWG-verified products. The brand bridges natural and luxury beauty boutiques, including Credo Beauty, The Detox Market, and Pharmaca, as well as top national retailers including Target and Whole Foods Market, proving that prestige beauty and wellness are not mutually exclusive. W3LL People also has two brick-and-mortar retail studios in Austin, offering the full collection of W3LL People products, as well as a curated selection of the best in natural beauty across skin, hair, and body care products.
Since 2004, e.l.f. has made the best of beauty accessible to every eye, lip, and face. They make high-quality, prestige-inspired cosmetics and skincare products at an extraordinary value and are proud to be 100% vegan and cruelty-free. As one of the first online beauty brands, e.l.f. has a passionate social following, national distribution at leading retailers such as Target, Walmart, and Ulta Beauty, and a growing international presence.
WHY: Buying W3LL People marks e.l.f.’s first serious move into the clean beauty space. The plan is to learn from the W3LL People team and further incorporate clean beauty formulations into the e.l.f. product assortment.
IN THEIR OWN WORDS: “We are pleased to bring clean beauty pioneer W3LL People under the e.l.f. Beauty umbrella as our first strategic extension. Clean beauty is a strategically important segment given consumer sentiment and strong growth rates. W3LL People has a long history of expertise and credibility in clean beauty that works. Their brand values and market opportunity align closely with e.l.f. and we believe there are a number of synergies to be realized on both the cost and distribution fronts,” said Tarang Amin, e.l.f. Beauty Chairman and Chief Executive Officer.
“We have been transparent about our desire to pursue strategic extensions that can leverage our strengths and bring new capabilities to e.l.f., and we have been disciplined in this process,” said Amin. “W3LL People is rooted in a deep and passionate understanding of clean beauty and shares our mission of making the best of beauty accessible. We believe that W3LL People’s twelve years of clean beauty experience and high-quality product line, in combination with e.l.f.’s multiple strengths from operations to marketing, will be attractive to our retail partners—including Target, our longest-standing customer.”
“W3LL People has a remarkable history of breaking beauty boundaries, and the acquisition by e.l.f. is an incredible milestone in our effort to make clean beauty accessible,” said James Walker, co-founder of W3LL People. “We feel tremendously grateful for our brand’s success and the extraordinary team that helped build it.”
- e.l.f. is paying $27 million in cash to take over the business, which is expected to do $7 million in net sales for 2020.
- The deal is expected to add 1 cent to e.l.f.’s adjusted earnings per share for fiscal 2021.
- All three founders are staying on board; the company would not comment if there are existing redundancies within W3ll People’s 30-plus team.
- In 2018, W3LL People received a minority investment from NextWorld Evergreen, which also backs Credo.
- e.l.f went public with an IPO in September of 2016.
- William Hood & Company, LLC advised W3LL People on the deal. e.l.f. did not use an adviser.
Acne-patch brand starface raises $2 million seed round
In a highly competitive category, Starface raised $2 million in a seed round led by BBG Ventures to invest in product innovation, and team and Canadian and European expansion.
WHO: Launched in September 2019, Starface was founded by former beauty editor Julie Schott and entrepreneur Brian Bordainick. The brand launched with one hero product, a hydrocolloid acne patch in the shape of a star and a mission to foster acne positivity.
WHY: The capital will be used to grow its team, invest in product innovation, and branch into Canadian and European markets this year.
IN THEIR OWN WORDS: “We see quite a few skincare and cosmetics businesses, almost all of which have a conventional lens on the category,” Andrew Mitchell, founder and general partner of Brand Foundry Ventures, told Vogue Business. “Starface addressed how traditional positioning has stigmatized an experience that’s just part of being human.”
- Starface raised $2 million in a seed round led by BBG Ventures with participation by Brand Foundry Ventures, Amity Supply, Able Partners and BVC,
- according to Pitchbook.
- The brand had a pre-seed raise of $1 million from investors that included Bobbi Brown.
- The company has seen sales grow roughly 50% month-over-month since launching.
- Starface has grown its social following to a combined 66,000 across Instagram and TikTok since launch.
- The brand’s average engagement rate on Instagram, at 1.95%, is nearly 1.5x higher than the industry benchmark of 0.87%, according to Thomas Rankin, CEO and co-founder of Dash Hudson.
- The brand has six new products slated to launch this year and plans to roll out two limited-edition takes on the original hydro-stars.
Conscious beauty brand five dot botanics secures seed investment
UK indie beauty brand Five Dot has secured seed funding from Worth Capital through The Start-Up Series competition designed to uncover new UK businesses with bright teams and smart ideas.
WHO: Founded by Zaffrin and Brian O’Sullivan, the London-based Five Dot Botanics launched in July of 2019 with the guiding principle of doing more with less. The minimal-ingredient skincare brand for men and women is primarily sold direct-to-consumer and in UK retailers Holland & Barrett and online retailers Farmdrop, Myza, and Immaculate Vegan.
London-based Worth Capital is a fund specializing in seed investments in start-ups in high-growth markets. The fund is managed by early- and growth-stage fund manager Amersham Investment Management.
WHY: The funds will be used to manufacture products, grow customer acquisition, and expand the team.
IN THEIR OWN WORDS:
Matthew Cushen, co-founder, Worth Capital said, “We’ve been interested in clean and minimalist beauty for a while but hadn’t made a move until we became confident that it was a real trend, not a fad, and until we saw a product and brand to fall in love with. That happened with Five Dot Botanics. We rate the proposition as one of the strongest we’ve seen and believe, with cash investment and maybe also the benefit of some of our experience, that Zaffrin and Brian can grow something really exciting—for consumers and our investors.”
“The investment from Worth Capital will allow us to scale and grow the brand, we’ve had a lot of consumer interest in minimal ingredient skincare. Our aim is to disrupt the status quo in beauty, offer radical transparency and become the leading minimalist skincare brand globally. This investment is the first step to making that ambition a reality,” said Zaffrin O’Sullivan, co-founder, Five Dot Botanics.
- Five Dot received a seed investment from Worth Capital.
- The investment qualifies for UK tax relief under The Seed Enterprise Investment Scheme (SEIS), designed to encourage investment in small, high-growth businesses.
- The company plans to enter another round of fundraising later this year.
- The business is gaining traction with repeat sales and retailer interest.
Margaret dabbs london sells minority stake
British beauty brand Margaret Dabbs London sells a minority stake to Best World International with the potential of acquiring 100% of the business.
WHO: Margaret Dabbs London was founded in 2004 and is globally recognized for luxury results-driven feet, hands, and leg products and services. In 2007 the brand was approached by Harrods to open a clinic on the fifth floor of the London flagship. Since then Margaret Dabbs London has established a total of nine clinics throughout the UK, and four internationally in the Middle East and Spain. The product range initially made for use in the clinics is available in retailers including Liberty, Harrods, John Lewis, and SpaceNK in the UK.
Founded in 1990, Best World International (BWI) is a Singapore-based company specializing in the development and distribution of premium skincare, personal care, nutritional, and wellness products. After listing on the Singapore Exchange in July 2004, Best World has grown to become a key regional player, having entered into 12 markets in Asia and the Middle East.
WHY: The transaction will help Margaret Dabbs London build its global presence and target the fast-growing global cosmeceuticals market.
IN THEIR OWN WORDS: Singapore-headquartered Best World, which distributes beauty, skincare, and wellness products, said, “constantly seeking opportunities to expand its geographical reach and product offerings” was part of the group’s growth strategy. “The proposed acquisition will provide the group with a premium beauty brand specialist established in the United Kingdom and Europe.”
- The purchase agreement with the three shareholders Margaret Dabbs, Ian Richardson, and Jonathan Day includes a put and call option agreement and a shareholders’ agreement with Ms. Dabbs and Mr. Richardson.
- BWI acquired a 49.9% stake for about £13.9 million ($24.6 million) in cash, to be funded with internal resources, under the deal’s first tranche.
- For the second tranche, Ms. Dabbs and Mr. Richardson may sell and Best World may buy any amount of the remaining 50.1% interest, comprising 348 shares or 30% held by Ms. Dabbs and 233 shares or 20.1% held by Mr. Richardson, by exercising put and/or call options.
- The option price per share will be computed based on 13.7 times of the target group’s EBITDA.
- According to The News Market, Margaret Dabbs London made £7.7 million in revenue and £1.8 million EBITDA for the year ending 31 December 2019.
- Cavendish Corporate Finance advised Margaret Dabbs London on the transaction.
BeautyMatter was born from Founder Kelly Kovack’s desire to provide a fresh voice to a beauty industry hungry for more content from her perspective, and through her lens. BeautyMatter aim to fill the void, connect the dots, and provide an informed, analytical, and compelling point of view. Exploring limits and blurring boundaries, they offer highly curated news and original content by thought leaders and beauty insiders.
Purchase the full BeautyMatter Beauty Deals: M&A Transactions Q1 2020 report here.
The Red Tree is the UK’s leading international beauty brand consultancy and a powerhouse of ideas, insight and inspiration. For an informal discussion on how we might help you, please contact us.
Middle East Beauty Hub
Explore our series of articles uncovering the intersection of tradition, innovation, and regulation within the nuanced Middle Eastern beauty markets.
Female Founders: The Lip Gloss Gap
Our series of articles highlighting how the UK beauty industry plays a vital part in closing the female fundraising gap.
New to the beauty industry? Our Founder Hub series brings together an array of articles covering topics from the costs of starting a new brand, to our recommended branding agencies.
Meet The Team
Get to know each of The Red Tree team members with our interview series. From our favourite campaigns to tips on how to enter the beauty industry.
Our series of articles exploring our fitness test for beauty brands. The unique RaceFit™ questionnaire allows you to quickly review the 7 building blocks crucial to brand success.
The Beauty Accelerator™
Read our series of articles focusing on The Beauty Accelerator™, which sees one emerging independent beauty brand receive equity investment plus the knowledge and expertise of The Red Tree.