BeautyMatter: Q2 2018 – Beauty Deals

Industry Expertise

26/07/2018 by The Red Tree

Mergers and acquisitions activity in beauty shows no signs of slowing down. The Red Tree take a look at 5 of the most eye catching deals from the last quarter. For the full article, visit BeautyMatter here.

Unilever acquires a majority stake in Equilibra

Who: Equilibra was founded in 1987 by Franco Bianco and has a growing presence in the “natural” personal care segments through its assortment of skincare and hair care, and is a leader in nutritional supplements in Italy. Equilibra’s brand proposition is based on its authentic Italian credentials and the use of plant-based ingredients with functional benefits, such as Aloe, Karité, Argan, and Almond.

Dutch conglomerate Unilever PLC was incorporated on June 21, 1894. The company’s segments include personal care, foods, home care, and refreshments. The company operates in more than 100 countries, selling its products in more than 190 countries. Unilever owns more than 400 brands including 11 “billion-dollar brands.”

Why: The investment will give Unilever a foothold in the Italian well-being market through Equilibra’s assortment of natural skin and hair care ranges, as well as nutritional supplements.

In their own words: Alan Jope, Unilever President Beauty & Personal Care, said, “Equilibra is very well-positioned in the wellbeing space in Italy and complements perfectly our existing offering. The Equilibra brand enjoys great recognition in the market, and we see opportunities for further development in what is a fast-growing segment.”

Franco Bianco, founder of Equilibra, stated: “We are delighted to work together with Unilever to take the next step in our journey. We aim to spread the Italian Beauty and Wellbeing abroad and strengthen our presence in Italy.”

Fulvio Guarneri, General Manager Unilever Italy, added: “Unilever has a successful track record of scaling partnerships with quintessential Italian brands on a national and European level. Unilever and Equilibra will leverage their complementary expertise to grow the Equilibra business, bringing sustainability, wellness and the Italian spirit to people in Italy and abroad.”

Details:

Unilever is set to acquire a 75% stake in Italian personal care company Equilibra.
Terms of the acquisition were not disclosed.
Equilibra will continue to be headed up by the current management team from its headquarters in Turin.

TPG makes minority investment in Anastasia Beverly Hills

Who: Romanian-born beauty entrepreneur Anastasia Soare launched her namesake brand with a Beverly Hills flagship salon in 1997, with the company’s first product line following in 2000. Since launching the brand, Soare has created an entirely new category in cosmetics—eyebrows—centered around her revolutionary brow-shaping technique, the patented Golden Ratio Eyebrow Shaping Method. In addition to brows, Soare and her daughter, Claudia Soare, have expanded their product set into the eyes, face, and lips categories. ABH products are available at anastasiabeverlyhills.com, Dillard’s, Macy’s, Nordstrom, Sephora, ULTA, and select retailers in over 25 countries. ABH is committed to cruelty-free product formulation, testing, and development.

TPG is a leading global alternative asset firm founded in 1992 with more than $82 billion of assets under management and offices in Austin, Beijing, Boston, Dallas, Fort Worth, Hong Kong, Houston, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, San Francisco, Seoul, and Singapore. TPG’s investment platforms are across a wide range of asset classes, including private equity, growth venture, real estate, credit, and public equity. TPG’s previous beauty investments (made through TPG Growth) include E.l.f. Cosmetics, which the firm took public in 2016, and Beautycounter.

Why: The brand plans to use its capital to fund global expansion and ramp up direct-to-consumer sales.

In their own words: “It has been incredible to watch Anastasia Beverly Hills evolve,” said Anastasia Soare, founder and CEO of Anastasia Beverly Hills. “With the help of my daughter, Claudia, what started as a singular brow studio in Beverly Hills has gone on to become one of the fastest growing companies in today’s global beauty industry. Claudia and I are extremely excited to announce our partnership with TPG. This is the next step in Anastasia Beverly Hills’ evolution. Their minority stake in the company will allow us to reach even more of our loyal fans across the globe.”

“Anastasia, Claudia, and their team have successfully built an authentic, high-growth, and innovative brand that deeply resonates with consumers,” said Paul Hackwell, Partner at TPG Capital. “As investors, we are excited by the opportunity to partner with dynamic entrepreneurs like Anastasia and Claudia to bring their vision to the next level. We are impressed by the company’s differentiated product offering and strong consumer advocacy, and look forward to working closely with management to further accelerate growth.”

Details:

Anastasia Beverly Hills has sold a minority stake to private equity firm TPG Capital.
Terms of the transaction were not disclosed.
According to WWD, industry sources said that Anastasia was being valued at as much as $3 billion. They also indicated that Anastasia Beverly Hills has faced declines in growth in recent months, along with the entire sector.
In December WWD reported the company had hired Imperial Capital to conduct a sale, the business was said to have $200 million in earnings before interest, taxes, depreciation and amortization, and $340 million in sales.
The companies did not disclose financial terms, but media reports value the brand at $3 billion, representing a multiple of nine times it has reported $340 million in net sales.
Imperial Capital acted as financial advisor to Anastasia Beverly Hills.
Goldman Sachs & Co. LLC, RBC Capital Markets, UBS Investment Bank, and Deutsche Bank acted as financial advisors to TPG and are providing financing for the transaction.
Kirkland & Ellis served as legal advisor to Anastasia Beverly Hills.
Ropes & Gray served as legal advisor to TPG.

Tengram Capital Partners acquires majority stake in Lime Crime

WHO: Founded by entrepreneurs Doe Deere and Mark Dumbelton in 2008, Lime Crime is a digitally native beauty brand and a cult favorite among fashion-forward beauty aficionados. For years, Lime Crime has set trends that have taken the beauty industry by storm—from its Unicorn Lipsticks in a rainbow of shades and Velvetines, to its best-selling Diamond Crushers lip toppers and, most recently, Unicorn Hair. Formulas are 100% vegan, cruelty-free, high performance and high payoff, all cutely packaged. Lime Crime is in high demand at leading retailers including Bloomingdale’s, Riley Rose, and Ulta.com, where it ranks as a leading color cosmetics brand, and has recently launched in the UK, originally online with Cult Beauty, and recently with FeelUnique and Selfridges. A digitally native brand, they have a powerful social media following of 4.4 million followers from across the globe.

Tengram Capital Partners is a private equity firm that focuses exclusively on leading consumer and retail companies that own strong recognizable brands. The team has a diverse background of consumer investing and operating expertise that assists and guides company management to unlock the true potential of their brand. Tengram invests in both traditional “growth” and “restructuring/turnaround” situations in either the public or private sectors. Current beauty investments for Tengram include ReVive, Algenist, Cos Bar, This Works. Prior investments include NEST Fragrances, DevaCurl, and Laura Geller Beauty.

In their own words: Richard Gersten, Partner at Tengram, stated, “Lime Crime is truly unique among beauty brands, with a powerful following and a deep understanding of its consumers and their expressive approach to cosmetics. We have tremendous appreciation for what Doe, Sasha Valentine and the team have built over the past ten years: a revolutionary brand that empowers consumers to express themselves and inspires them to push past the traditional limits of beauty. In an era of beauty brand proliferation, Lime Crime’s authenticity and innovation stands above the rest. Lime Crime is a tremendous fit in our strong portfolio of beauty brands, and we look forward to leveraging our experience to help the Lime Crime team achieve its growth prospects.”

“I’m delighted to be joining the company at this pivotal moment,” said Stacy Panagakis. “Lime Crime is a millennial brand with a message that resonates with women everywhere—’it’s OK to be bold, experiment and have fun!’ The partnership with Tengram is an important next step in the brand’s evolution, bringing deep industry expertise and greater opportunities to offer unicorns and women everywhere the Lime Crime magical universe. As we expand the brand’s footprint and offerings, Lime Crime will continue to be a brand that stands apart, fulfilling its mission to revolutionize makeup, empower women and smash traditional boundaries.”

Doe expressed her enthusiasm about the investment and growth opportunities for the business. “I founded Lime Crime on the belief that beauty is a form of freedom. We should all be allowed to express ourselves unapologetically. Over the last decade, unicorns all over the globe have taken that idea and made it their own, propelling us to where we are today. I am so proud of what we’ve built together and am confident Stacy, Sasha and the team will continue to build on this foundation to take Lime Crime to a whole new level!”

Details:

Tengram Capital Partners has acquired a majority stake in Lime Crime.
According to WWD, industry sources estimated that the business did $30 million in net sales for 2017.
Terms of the deal were not disclosed.
Stacy Panagakis, formerly General Manager of Fresh, joins Lime Crime as Chief Executive Officer.
Lime Crime’s creative vision will continue under Ms. Panagakis, who will work alongside Chief Creative Officer Sasha Valentine, an eight-year veteran of the brand.
Doe Deere, Lime Crime’s co-founder and forever muse, has transitioned out of day-to-day operations and has joined the Board of Directors, where she will continue to do what she loves: explore, dream, and inspire unicorns around the world.
Financo advised Lime Crime on the transaction.

L. Catterton makes $200 million investment in Honest Co

WHO: Co-founded by actress Jessica Alba, The Honest Co. was launched in 2012 as a direct-to-consumer proposition of safer alternative baby products. It has evolved into an eco-friendly consumer-goods business. Honest Beauty is sold at Target and on Amazon, and the hair products are sold at Ulta Beauty. By the end of the year, the brand will launch more than 80 new and improved baby and beauty products, including the company’s most significant diaper innovation since its inception, and a reimagined lineup of high-performance clean beauty products.

L Catterton is a private-equity firm, formed in 2016 through the partnership of Catterton, LVMH, and Groupe Arnault, and invests in consumer-focused companies globally. Based in Greenwich, Connecticut, the firm oversees about $14 billion in assets. The firm has long invested in the consumer segment, and in beauty. Current holdings include stakes in Bliss, Elemis, Tula, Kopari, Il Makiage, and Cover FX.

Why: The capital will accelerate global growth plans and will include expanding Honest Beauty into Europe for the first time with a Douglas launch in spring 2019. That line is also being revamped, with new packaging, products, and prices. The investment will fund continued innovation.

In their own words: “The Honest Co. has tremendous brand equity, innovative and quality products and a loyal customer following,” Scott Dahnke, global co-Ceo of Catterton, told WWD. “The Honest Co. has evolved into a lifestyle brand and has many channels to grow in natural baby, personal care, beauty and adjacent categories in the future.”

Nick Vlahos said to WWD regarding a potential IPO: “We’re a six-year-old company and we compete with companies like Procter & Gamble that is 181 years old. We’re in our infancy from a development standpoint, we’re getting into the toddler years now, and we continue to have opportunity, based on where consumers are gravitating in wellness and better-for-you-type products, to really build an iconic global brand. There’s no discussions around, ‘Hey, we need to go public, we need to go do anything other than what we’re doing,’ currently. We’re well funded as an organization, we have a very clear strategy that we established a year ago when I joined this company.… We’ve just scratched the surface in North America, we’re just embarking on a new frontier in Europe and then the world is our oyster as we look to the future.”

“It has always been my dream to grow The Honest Company into a global brand,” Jessica Alba, founder of The Honest Company, said in a statement. “Our mission from day one has been to empower people to live happy and healthy lives, and we are always in search of new ways to bring that to life. This partnership will enable us to empower more people in more places by delighting them with products that meet their desire for safety, design and performance.”

Details:

L Catterton makes a $200 million minority investment in The Honest Co. The size of the stake wasn’t disclosed.
Honest marks the firm’s first traditional CPG investment for L Catterton.
Baby and beauty are growing double digits, the brand told WWD; beauty was up 34% for 2017.
Honest raised $297 million from its six prior funding rounds, according to data from Dow Jones VentureSource.
The Honest Company will continue to be led by its current management team under Nick Vlahos’ leadership, which will continue to be headquartered in Los Angeles.
A funding round in 2015 valued Honest Co. at about $1.7 billion, a person with knowledge of the details at the time told Bloomberg.
According to Bloomberg, reports have pegged Alba’s stake at about 15-20% of the company.
Things have shifted at Honest since Vlahos, a CPG veteran responsible for the global expansion of brands like Burt’s Bees, took the helm in March 2017.
In 2017, Honest settled the suit over cleaning ingredients for $1.5 million, and a suit related to “natural” labeling for $7 million. According to Reuters, following the settlement, and after a possible deal with Unilever faded, the company said it was raising new funds, at a lower price than its previous round.
In 2016, Unilever was eyeing an acquisition of the company but ultimately bought its competitor Seventh Generation for $700 million.
In 2016, Honest Co. was working with Goldman Sachs Group Inc. and Morgan Stanley on plans for an initial public offering, people familiar with the matter at the time told Fortune.
Alba has mentioned that she will step back from the day-to-day operations to focus on her acting career.
Goldman Sachs advised Honest on the L Catterton investment.

Scentbird secures $18.6 million series a funding

WHO: Scentbird is a subscription-based fragrance company launched in 2013 and cofounded by Mariya Nurislamova (CEO), Sergei Gusev (COO), Andrei Rebrov (CTO), and Rachel ten Brink (CMO). The subscription model has upended the fragrance category offering access to over 500 fragrances. The sampling service has expanded to include a range of namesake personal care and home fragrance products.

Why: Scentbird will use the funds to accelerate growth, ramping up product innovations, market expansion, new talent, and a focus on customer experience.

In their own words: “We are excited to launch Scentbird into the next stage of its growth,” said Mariya Nurislamova in a statement. “Attracting investors who understand the unique digital landscape and what we offer consumers, will bolster our position in the beauty industry on a larger scale. This funding shows the investors’ confidence in our team, the market opportunity, and our mission. It will allow us to keep moving at a fast pace while cultivating the creativity and technology to continually build our brand.”

Eric Kim, cofounder and managing partner at Goodwater Capital, told WWD the company hopes to support Scentbird on its “mission to transform the beauty space and change the way consumers approach fragrance.” He added, “At Goodwater Capital, our focus is on supporting entrepreneurial innovators who are not only disrupting product categories, but who are also challenging the status quo.”

Details:

Scentbird raised an $18.6 million Series A round of funding led by Goodwater Capital, a next-generation consumer technology firm, and joined by Y Combinator, Rainfall Ventures, FundersClub, Soma Capital, Scrum Ventures, ERA, and others.
95% of the company’s revenue comes from subscriptions and captures 1% of the multibillion-dollar prestige fragrance market, striving to double that number in the next year.
The brand has seen 110% growth over the last year with subscriber numbers skyrocketing from 400 at the time of its initial seed round to 250,000 today.
The team bootstrapped Scentbird for the first 10 months before going through Entrepreneurs Roundtable Accelerator (ERA), an early-stage venture capital fund and technology accelerator, that invested the first $40,000.
The company raised an $5.8MM seed round over the course of two years before raising their Series A.

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