Beauty mergers and acquisitions activity looks set to hit record levels in 2018 with nearly $500 million dollars invested into start ups so far. Quarter 3 saw acquisitions and investments across the industry and our latest article looks at 5 of the most eye catching deals. For the full article, visit BeautyMatter here.
1. L’Oréal acquires Logocos Naturkosmetik
L’Oréal is acquiring Logocos Naturkosmetik AG, the German beauty company that pioneered natural cosmetics with the brand Logona and other brands such as Sante. All the brands in the company’s portfolio are vegan and bio certified with a range of products that use their own plant extracts and natural ingredients derived from organic farming.
WHO: Founded in 1978 by a naturopath, Logocos Naturkosmetik is based in Hanover, Germany. Logona products cover haircare, hair color, skincare, and hygiene product categories and are found in specialized distribution, mainly organic stores, at a premium price level for the engaged consumers of natural cosmetics. The Sante line of products includes haircare, skincare, hygiene, and makeup and is found mainly in mass retail at an accessible price for young and trendy consumers. L’Oréal has devoted itself to beauty for over 100 years. With its unique international portfolio of 34 diverse and complementary brands, the Group generated sales amounting to 26.02 billion euros in 2017 and employs 82,600 people worldwide. As the world’s leading beauty company, L’Oréal is present across all distribution networks: mass market, department stores, pharmacies and drugstores, hair salons, travel retail, branded retail, and e-commerce.
View this post on Instagram
Wir zeigen euch weitere old vs. new Produkte am #throwbacktuesday ! 😊 Welches ist euer Lieblingsshampoo? 😍 Schreibt es uns in die Kommentare ☺️ #logona #logonanaturkosmetik #naturkosmetik #retro #oldvsnew #crueltyfree #tierversuchsfrei #jubiläum #altundneu #shampoo #organic #vonnaturausschön #natural #bio #bioshampoo #biokamille #life #tuesday #dienstag #biozitronenmelisse #biobrennnessel
IN THEIR OWN WORDS: Alexis Perakis-Valat, President of L’Oréal’s Consumer Products Division, said “Logocos brings to the Division two authentic and certified naturaI brands as well as a unique expertise from a worldwide pioneer of the organic beauty market. In line with L’Or.al’s strategy to ‘seize what starts,’ this acquisition reinforces the position of the Division on one of today’s major beauty ascending trends.” Fabrice Megarbane, General Manager L’Oréal Germany, said “L’Oréal Germany is excited to acquire an expertise in natural cosmetics in a market where the desire for organic cosmetics is among the highest in Western Europe.”
• L’Oréal is acquiring Logocos Naturkosmetik AG.
• The terms of the transaction were not disclosed.
• In 2017, net sales were 59 million euros across Germany and other countries in Europe.
• L’Oréal plans to expand the sales of Logocos Naturkosmetik brands internationally.
2. P&G acquires First Aid Beauty
First Aid Beauty has been backed by private equity firm Castanea Partners since 2015. Procter & Gamble has acquired the company for an estimated $250 million.
WHO: Founded in 2009 by beauty industry veteran Lilli Gordon, First Aid Beauty (FAB) is a leading indie skincare brand born from an identified need for efficacious and fun sensitive skincare solutions. She built FAB centered around healing skin. The line has several collections that target skin concerns like aging, acne, dryness, dullness, and redness. The company’s products are available through key domestic retail partners, including Sephora, Ulta, and QVC, and internationally through Sephora Southeast Asia and Tmall Global.
Castanea is a private equity firm that works in partnership with founders and management teams of innovative passion brands to grow their businesses through a combination of capital investment and operating expertise. They typically invest between $15 to $150 million of equity in minority or majority transactions. Their team of talented operating executives offers critical expertise in key verticals and functional areas, and provides partner companies with strategic and tactical support. Castanea has raised over $1 billion and is currently investing from a $735 million fourth fund.
Headquartered in Cincinnati, Ohio, Procter & Gamble (P&G) is a Fortune 500 company and global leader in Consumer Packaged Goods. P&G serves nearly 5 billion people around the world with its multi-category portfolio, which spans beauty, healthcare, grooming, fabric and home care, and baby, feminine, and family care. P&G’s brands are widely recognizable, including Crest, Febreze, Gillette, Head & Shoulders, Olay, Pantene, SK-II, and Tide.
IN THEIR OWN WORDS: “We’re looking in our skin-care portfolio for brands that [complement] our portfolio in benefit spaces where we’re currently not present, or in segments of the market where we’re not present, and First Aid Beauty fits the bill pretty well,” Markus Strobel, president of P&G’s global skin and personal care, said to WWD. For one, FAB sits between the high-end price point of SK-II and mass-market price point of Olay. But the acquisition also gives P&G greater access to the specialty retail channel in North America: FAB is sold at Sephora and Ulta Beauty, as well as QVC.
Under P&G, FAB will be able to increase its global footprint “much faster and so much more effectively,” Gordon noted, and gain access to more research and development resources. “It’s going to be like letting me loose in a candy shop,” Gordon said.
“What Lilli and her team have accomplished over the last three years is really to just broaden the reach, broaden the audience that is aware of First Aid Beauty, introduce new people to the brand and really convert those folks into loyal customers,” said Steve Berg, managing director at Castanea. “They’re early in the process of doing that in North America, and certainly globally, and P&G will be a fantastic partner in helping to accelerate that growth.”
• Terms of the deal were not disclosed.
• According to WWD, industry sources said P&G paid around $250 million for the brand. First Aid Beauty is said to have about $50 million in net sales.
• Founder Lilli Gordon will remain in charge of the brand as chief executive officer.
• The business will operate as a wholly owned subsidiary, with Gordon reporting to Markus Strobel, president of P&G’s global skin and personal care.
• FAB has been backed by private equity firm Castanea Partners since 2015.
• Financo was the exclusive financial advisor to First Aid Beauty on the transaction.
3. Blue Gem Capital acquires Iconic London
BlueGem Capital Partners, owner of Liberty London, makes a second acquisition in the beauty space with a majority stake in the indie makeup brand Iconic London. This deal is the second transaction for BlueGem in the past nine months, having acquired QMS Medicosmetics in October. In a statement, BlueGem says it will continue to look for premium brands in the beauty space, and the aim is to take them global before selling them in a three- to five-year time frame.
WHO: Launched in 2015 by former makeup artist Jade Elliott, Iconic London is a trend-led brand catering to an audience mostly in their mid-20s. The brand is known for its liquid highlighter and illuminator hero products. The product is cruelty-free, while the brushes and the illuminator are vegan. The brand is sold through Harvey Nichols, Fornum & Mason, and Cult Beauty in the UK.
Blue Gem Partners has an entrepreneurial approach to portfolio management, acting as a hands-on partner in the value creation process. They have assets under management of over €500 million, raised from a global investor base. They seek to invest €20 million to €75 million of equity in medium-sized business in selected countries in Western Europe with an enterprise value between €50 million and €300 million.
WHY: The investment is earmarked to accelerate growth from a retail, product, sourcing, and staffing point of view.
IN THEIR OWN WORDS: “The time has come to take Iconic to the next level with the right investment. It has been the most incredible journey and I cannot wait to embark on the next stage with Blue Gem’s support,” Elliott said of the acquisition; she also noted Blue Gem’s involvement will support the brand’s US rollout in late 2018.
Blue Gem noted Iconic London “has consistently challenged the traditional beauty landscape with a new approach to purchasing beauty in the digital age, amassing over 800K global followers and influential fans to date, which has been integral to the brand’s instant success.”
• Terms of the deal have not been disclosed.
• According to WWD, the plan is to quadruple sales, which are understood to be under 10 million pounds.
• The UK is Iconic’s biggest market, generating 60% of sales, followed by the US with 30%.
• Jade Elliott will stay on full time to build the brand.
4. Warpaint London acquires US distributor
Warpaint London, the specialist supplier of colour cosmetics and owner of the W7 and Technic brands, has acquired the company’s US distributor, Marvin Leeds Marketing Services Inc.
WHO: New York-based Marvin Leeds Marketing currently derives approximately two-thirds of its revenue through the distribution of Warpaint London’s W7 products, with the remainder being through the sale of other branded cosmetics. Leeds Marketing was the Company’s exclusive distributor in the US until January 2018 and sells products to major “off-price” retail groups in the US and Canada, including the TJX Companies and Bealls Outlet Stores. Recently Leeds Marketing has opened new accounts for W7 and other Warpaint brands with a number of retailers including Century 21 (12 stores), Forever 21 (506 stores), and Macy’s Backstage (72 stores).
Warpaint London is a UK-based colour cosmetics business with two divisions: close-out and own-brand. The larger division, own-brand, consists primarily of the group’s flagship business, W7. The company acquired Retra Holdings in 2017, adding a group of owned and licensed brands, such as Technic, Body Collection, and Man’s Stuff, to the portfolio.
WHY: The US is the world’s largest colour cosmetics market by value, and the transaction will provide greater control over North American sales activities facilitating international expansion. In addition, the acquisition is expected to open up expansion opportunities in Central and South America, where customers prefer to be served by a US-based entity.
IN THEIR OWN WORDS: Sam Bazini and Eoin Macleod, Joint Chief Executives of Warpaint, said, “We see the acquisition of Leeds Marketing as a further important milestone in our growth story. Since admission to AIM, we have focused on international expansion and the US is central to that strategy. The Acquisition will allow Warpaint and its brands direct access to some of our key existing customers, as well as opening up a number of new opportunities in the USA and the Americas more widely. We look forward to integrating the Leeds Marketing staff into the existing Warpaint team and continuing to expand the routes to market for our products.”
• Warpaint London has acquired the Company’s US distributor, Marvin Leeds Marketing Services Inc.
• The terms of the acquisition consist of US$2.16 million in cash, subject to an adjustment depending on the net assets acquired which are expected to be US$0.8 million. The company has paid US$2 million in cash with two further payments of $80,000 due on 30 September 2018 and 31 December 2018, subject to the net asset adjustment.
• In 2017 according to Market Screener, Leeds Marketing had revenue of US$5.9 million and profit before tax (adjusted for non-recurring costs after completion of the acquisition) of approximately US$0.4 million. Net assets, adjusted for a capital reorganization on completion of the acquisition, as of 31 December 2017 were US$1.1 million. The sale was led by Canadian Imperial Bank of Commerce, Royal Bank of Canada, and Jefferies Securities, Inc.
5. The Hut Group acquires Acheson & Acheson and Ameliorate
The Hut Group‘s (THG) M&A tear continues with the acquisition of British contract manufacturer Acheson & Acheson and skincare brand Ameliorate in a deal Sky News reported to be worth between £50m and £100m.
WHO: Acheson & Acheson, founded in 1992 by Fiona and Kenneth Acheson, provides a range of services for brands including product design and development, formulation development, international sourcing, product testing, UK manufacturing and distribution. They also own skincare brand Ameliorate, which is sold at Selfridges, Boots, Harvey Nichols, and Marks & Spencer.
The Hut Group was founded in 2004 by chief executive Matthew Moulding and CFO John Gallemore, and retails more than 8,000 brands and operates more than 160 localized web sites across 35 languages and 42 currencies. The group said its platform receives more than 500 million visits annually. Other holdings include Eyeko, Illamasqua, ESPA, Skinstore, RY, Glossybox, and Lookfantastic.com.
WHY: The Hut Group is planning to spend up to 50 million pounds to replicate Acheson & Acheson across Europe and the US, as part of its strategy to widen its stake in the beauty and wellness markets by investing in new brands and technology services.
IN THEIR OWN WORDS: “In Acheson & Acheson, we have made a significant investment and one that uniquely positions THG to make a step-change in its innovation, operational excellence and manufacturing capacity,” Matthew Moulding, the group’s chief executive officer, told WWD.
• The Hut Group acquired British contract manufacturer Acheson & Acheson.
• Terms of the deal were not disclosed but Sky News reported the deal is understood to be worth between £50m and £100m.
• Ameliorate is included in the purchase and will subsequently be added to THG’s brand portfolio.
• Acheson & Acheson has up to 350 employees—50 of whom work exclusively on product development and innovation—and has a 78,000-square-foot manufacturing facility in Somerset, outside London, as well as a storage facility and head office.
• All of the company’s facilities, as well as its in-house label called Ameliorate, will be added to THG’s portfolio.
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.