2016 Beauty M&A Deals in Q4 saw a number of historic firsts. Emily Weiss raised $24 million in a Series B for Glossier representing one of the largest rounds of funding raised by a woman-led startup. And Estée Lauder’s $1.45 billion acquisition of Too Faced is the largest purchase in the 70-year history of the company. The year also ended with a flutter of consolidation on the supply side of the beauty industry across fragrance houses, contract manufacturers, and packaging companies. For market watchers, 2016 Beauty M&A for Q4 did not disappoint.
MEITU $629 MILLION IPO
WHO: The company was launched in 2008, by founders Xinhong Wu and Wensheng Cai, Meitu China’s number-one photo editing app describing itself as the ultimate photo toolkit in one easy-to-use app. Instagram and Snapchat have allowed people to apply perfecting filters, but Meitu takes filters to a whole other level. The company has built a suite of apps including MeituPic, Meipai, SelfieCity, BeautyCam, BeautyPlus, Airbrush, and MakeupPlus that are installed on more than 1 billion unique devices, and growing by more than 200 million new activations every day.
WHY: The company plans to leverage the beauty-conscious subscriber base for advertising and e-commerce. The goal is to increase users globally through the development of localized features.
- Meitu raised $629 million in an IPO in Hong Kong.
- The company remained valued at HK$35.9 billion ($4.6 billion) after the first day of trading.
- According to Bloomberg, the controlling shareholder of Hong Kong-listed fashion company Portico International Holdings Ltd. agreed to buy $120 million of stock in Meitu’s IPO as a cornerstone investor. Chinese property developer Kingkey Group committed to invest $40 million.
- In 2014, Meitu Technology completed A, B, and C rounds of financing totaling $360 million, with a $2 billion valuation. Investors include Innovation Works, IDG, Qiming Venture Partners, Tiger Fund, Ce Yuan Ventures, H Capital, Foxconn, and China Asset Management Co., Ltd.
- Morgan Stanley, Credit Suisse Group AG, and China Merchants Securities Co. were joint sponsors of the offering.
GLANSAOL TO ACQUIRE LAURA GELLER, JULEP, AND CLARK’S BOTANICALS
WHO: Laura Geller is a leading prestige color cosmetics brand developed in 1997 by professional makeup artist Laura Geller. The brand is renowned as the pioneer of the “baked” category of makeup—cult-favorite, multitasking powders that deliver remarkably vibrant color—and for its easy-to-use, dual-purpose products intended to simplify and improve women’s makeup routines.
Julep is a prestige color cosmetics and skincare brand founded by Korean-born Jane Park with the vision that beauty can be a fun and fearless experience for all women. Her desire to bring women together led her to launch four nail parlors in Seattle in 2007, which also served as a test lab to share experiences and provide feedback on products. Julep has since evolved into a top selling, omni-channel beauty brand. Its unique innovation process incorporates the voices of thousands of “Mavens” for online social input.
Clark’s Botanicals is a premium skincare brand founded in 2008 by Francesco Clark after he suffered a crippling spinal cord injury and lost the ability to walk. With his central nervous system impaired, Francesco was afflicted with clogged pores, chronic breakouts, and an inability to naturally exfoliate, which could not be remedied through traditional means. In partnership with his father, Dr. Harold Clark, they developed a line of products containing Jasmine Absolute, a proprietary, rebalancing ingredient, and the brand has become a favorite among the beauty elite.
Glansaol was founded through a partnership between Alan T. Ennis, a beauty industry veteran and former President and Chief Executive Officer of Revlon Inc., and Warburg Pincus, a global private equity firm focused on growth investing. The company will operate an integrated portfolio of global beauty and personal care brands, diversified across segments, channels, and geographies.
WHY: Glansaol hand-selected Laura Geller, Julep, and Clark’s Botanicals to be its first acquisitions because of their inspirational founders, high-quality products and unique position within the marketplace.
IN THEIR OWN WORDS: Alan T. Ennis, President and CEO of Glansaol: “I am delighted to be taking this first bold step. Each of the three brands we are acquiring today plays a specific and important role in our portfolio and will retain their individual brand autonomy and culture. I believe that our unique long-term view of building the next great beauty company, is appealing to both brand owners and the capital markets.”
- WWD reported that industry sources estimate that combined, the three brands have $100 million in revenue.
- The terms of the transactions were not released.
- Glansaol has been working closely with Financo and Wells Fargo Securities in connection with the transactions.
FRED’S PHARMACY TO ACQUIRE 865 RITE AID STORES
WHO: Memphis-based Fred’s is a chain of 647 stores in 15 states with 317 stores operating full- service pharmacies. The stores are best described as a hybrid of discount dollar stores and drugstores.
WHY: Divesting of stores could pave the way for the Walgreens Boots Alliance to finalize the Rite Aid transaction which was delayed in October over anti-trust concerns. The addition of the 865 Rite Aid stores could allow Fred’s to expand more deeply into the beauty category and allows for potential growth into other markets where Rite Aid operates.
IN THEIR OWN WORDS: Fred’s Pharmacy Chief Executive Officer Michael K. Bloom commented, “This will be a transformative event for Fred’s Pharmacy that will accelerate our healthcare growth strategy through our acquisition of 865 new stores located in highly attractive markets. We believe that this transaction will also create tremendous opportunities for both our new and existing front of store and pharmacy team members. We look forward to realizing the considerable benefits this transaction will bring to our customers, patients, payors, supplier partners, team members and shareholders.”
- Fred’s signed an agreement with Walgreen’s Boots Alliance, Inc. and Rite Aid Corporation to purchase 865 stores and certain assets related to store operations for $950 million in cash.
- Fred’s Pharmacy expects that the acquired stores would be accretive to earnings and generate substantial cash flow.
- Fred’s Pharmacy will continue to employ, contingent on consummation of the transaction, store and certain field and regional team members related to the operations of the acquired stores. Upon completion of the acquisition, the company will operate the acquired stores and will retain the Rite Aid banner through a 24-month transition.
- A.T. Kearney served as a strategic advisor to the CEO and Board of Directors and provided financial and operational diligence related to the transaction.
BofA Merrill Lynch and Regions Bank have committed to provide financing to Fred’s Pharmacy.
- Peter J. Solomon Company, LLC provided a fairness opinion to the Board of Directors of the company in connection with the transaction.
GROUPE ROCHER BUYS STAKE IN SABON
WHO: Sabon is the brainchild of Avi Piatok and Sigal Kotler Levi. The first store opened in Tel Aviv in 1997 and has grown to an international network of 175 locations. Each of the stores looks identical and carries the same assortment of products that are developed and manufactured in the company’s facilities outside Tel Aviv.
Groupe Rocher is 97% owned by its founding Rocher family. It has eight brands in its portfolio, Yves Rocher, Petit Bateau, Stanhome, Dr Pierre Ricaud, Daniel Jouvance, Kiotis, ID Parfums, and Flomar. Nearly three quarters of its sales are generated in France and Western Europe
WHY: Groupe Rocher is buying control of the company to bolster its global capabilities and accelerate its overseas expansion.
IN THEIR OWN WORDS: Groupe Rocher CEO Bris Rocher said, “Buying the controlling stake in Sabon matches our international growth aspirations. Our extensive knowledge in the company’s different fields of operation, together with strong cooperation with Sabon’s staff, will help both the company and Groupe Rochet to grow worldwide.”
- Groupe Rocher is acquiring 66% of Sabon for $129 million.
- Sigal Kotler-Levi and Avi Piatok, Sabon’s founders will stay on in their current roles and maintain substantial stakes in the company.
- Rocher has an option and is expected to acquire full control of the company.
- Groupe Rocher was represented in this deal by Adv. Michelle Liberman and Amit Steinman from the S. Horowitz & Co. law firm.
- Sabon was represented by Adv. Nir Calderon.
UNILEVER TO ACQUIRE LIVING PROOF
WHO: Founded in 2005, Living Proof was conceived by venture capitalist and entrepreneur Jon Flint to bring advanced biomedical technology to the beauty industry. Together with MIT professor Robert Langer, they assembled a team of world-class biomedical scientists and industry-leading hair stylists to create a comprehensive portfolio of hair products. The company staffs professors and scientists and holds 20 patents for chemical technologies included in its shampoo and other hair-care products. The problem-solution hair-care line sold across salon, prestige, and mass distribution channels.
Unilever closed 2015 with a headline-making prestige skincare acquisition spree, grabbing Dermalogica, Kate Sommerville, Murad, and Ren. The buying spree continued in 2016 with the Dollar Shave Club and Seventh Generation. Drugstore brands like TRESemmé, Suave, Dove, and Clear, and salon labels Nexxus and TIGI are all currently in the Unilever portfolio. The Living Proof acquisition marks the company’s first prestige hair-care acquisition.
IN THEIR OWN WORDS: Unilever’s Alan Jope, President, Personal Care, said, “We are delighted to be adding Living Proof to our portfolio of Prestige brands. The Prestige Hair retail market is very attractive and offers significant potential for growth. Through compelling product result demonstrations and influencer-driven marketing, Living Proof is already a successful business in this space, and we look forward to further developing and growing this wonderful brand.”
- According to WWD, Unilever has purchased a 100 percent stake in Living Proof.
- Living Proof will be part of Unilever’s Prestige portfolio, which includes brands such as Dermalogica, Kate Somerville, Murad, and REN.
- Industry sources estimate Living Proof’s overall net sales to be $60 to $75 million and believe could have sold for about $200 million.
- In 2012 Jennifer Aniston was brought in as a co-owner and spokesperson. WWD reported she would no longer be affiliated with the brand.
- The business raised $53 million in funding to date from three investors: Leerink Partners, Piper Jaffray, and Polaris Partners.
- In 2008, Polaris Partners contributed to a $7 million Series A funding.
- In 2011, Piper Jaffray and Polaris Partners contributed to a $16 million Series B funding.
- In 2013, Leerink Partners contributed to a $30 million Series C funding.
The acquisition is expected to close in Q1 2017, subject to customary regulatory approvals.
- Terms of the deal were not disclosed.
MEMEBOX SERIES C EXTENSION OF $60MM
WHO: Memebox was launched by CEO Dino Ha in 2012 as a beauty box focused on K-beauty. It pivoted to a direct-to-consumer e-commerce model when the curated box model began to lose steam. Memebox is one of the world’s fastest-growing online beauty startups with a reach from South Korea to China and the US markets. Memebox says it now has offices in six countries and employees from 14 nations. The company sells more than 1,200 Korean brands and recently launched four in-house product lines.
WHY: The August investment was earmarked to open more brick-and-mortar stores and expand into other markets. The company said the new Memebox Series C funds will go toward streamlining the company’s global operations, focusing on its mobile platform and developing a database of beauty ingredients and products.
IN THEIR OWN WORDS: “What Memebox is doing with mobile and video is unprecedented in the beauty landscape. Memebox has the heart of a high-end brand, the brain of a deep data company, and the muscle memory of a social network. At its core, Memebox is dedicated to delighting this generation of customers who care deeply about beauty and skincare. We are proud to be part of bringing this traditional industry into the 21st century,” said Eric J. Kim, Managing Partner at Goodwater Capital and Memebox board member.
- This latest round of $60 million in the Memebox Series C funding was led by new and existing investors Goodwater Capital, Altos Ventures, Cowboy Ventures, Mousse Partners, Formation Group, Funders Club, Pear Ventures, Cota Capital and Janet Gurwitch.
- The company has added Castanea partner and Laura Mercier founder and former CEO Janet Gurwitch to its advisory board.
- Arnold Hur, president of Memebox US, told TechCrunch that the company’s total GMV—the volume of transactions on its platform—is at a $150 million annual run rate, with 280 percent annual growth.
- Hur said Memebox’s China business increased 1,200 percent year-on-year, while it grew 490 percent annually in the US.
- The company raised $66 million in funding in August 2016, led by previous investors Formation 8, Goodwater Capital, and Pejman Mar Ventures.
- Memebox would not disclose the valuation at which the funding was raised, only to say it was at an up round.
- The deal takes Memebox, one of Y Combinator’s top companies in 2014, to $120 million from investors to date.
- In March of 2015, the company raised $29 million from investors at what was reported to be a $100 million valuation. Last year’s investors included Yahoo co-founder Jerry Yang, Y Combinator, FundersClub, Cowboy Ventures, Altos Ventures, and Winklevoss Capital, in addition to the firms involved in the latest, Series C round.
BOGART GROUP ACQUIRES HC PARFUMERIE GROUP
WHO: HC Parfümerie Group was founded in 1971 by the Warschau family. Today, the Group includes 80 own-brand boutiques and seven franchise stores across Germany.
Bogart Group specializes in the creation, manufacture, and commercialization of luxury fragrances and cosmetics. Bogart’s portfolio consists of its own fragrance brands, Ted Lapidus and Carven, and licensed brands Chevignon, Lee Cooper, and Naf Naf, and own cosmetic brands Méthode Jeanne Piaubert and Stendhal. In addition to their retail doors, the group distributes their products in 90 countries.
WHY: The expansion into Germany through the bolt-on acquisition is in line with the strategic roadmap announced by the Bogart Group during its capital increase at the end of 2015. It will enable Bogart to cement its position as a Europe-wide retail chain, accelerate its global expansion, and double its network of boutiques, but will also have a strong leverage effect on all of the Group brands.
- The terms were not disclosed.
- HC Parfümerie Group posted turnover of more than €30 million in 2015 as well as positive current operating profit.
- The acquisition of HC Parfümerie will be in cash and financed using Bogart Group equity.
- The company will be consolidated within the Group accounts from 1 December 2016, after which Bogart Group’s new scope will include 152 sales outlets located across Germany, France, and Israel.
- Chief Executive Officer Henrik Warschau will oversee the development of the Group’s 80 boutiques during the 15 months following the signing of the agreement.
GLOSSIER SERIES B $24 MILLION RAISE
WHO: In two years Glossier has built a team of 44 employees, raised $10.4 million in seed and series A round, and has regular waiting lists for their product launches. This quarter Glossier Series B added $24 million to the coffers for growth. In true Glossier fashion, founder and CEO Emily Weiss announced the new funding direct to her consumers through a post on her Into The Gloss blog titled How We Raised Our Latest Round Of Funding. According to Forbes, the $24 million raised represents one of the largest rounds of funding raised by a woman-led startup.
WHY: To fund the opening of a retail store, international expansion, launching two new product categories, and a continued investment in technology.
IN HER WORDS: [S]omething I believe in, is that “Glossier is cult, it’s not niche,” and that’s because we believe in the democratization of beauty. Glossier was created not to be for a privileged “some” but for an activated “all”—and we are still early in our journey to fulfill that promise.
- The series B round of $24 million was led by a new investor IVP with support from Index Ventures.
- Revenue is on track to grow 600% in 2016.
- This round puts the total raised to date at over $35 million.
- In November of 2014 Glossier closed a Series A round of $8.4 million led by Thrive Capital with the participation of other investors that included 14W, TOMS Capital. Manzanita Capital, WME, Forerunner Ventures, and Lerer Hippeau Ventures.
- Kirsten Green of Forerunner Ventures led the $2 million seed round.
BLACKHAWK NETWORK ACQUIRES SPAFINDER WELLNESS
WHO: Spafinder Wellness has 30 years of experience as a spa and wellness authority and is considered the largest media, marketing, and gifting company for the wellness industry.
Blackhawk Network is a publicly traded, multinational corporation based in the San Francisco Bay Area that launched in 2001 with the concept of retailing third-party gift cards. Spafinder and Blackhawk Network is not an entirely new relationship. Blackhawk Network has been one of Spafinder’s distribution partners.
WHY: Blackhawk has the scale and infrastructure to reduce Spafinder’s costs, improve services, and drive customer acquisition for spas and the sale of spa services.
IN THEIR WORDS: “We’re also excited to expand our reach into spas by offering Blackhawk’s platform solutions,” said David Tate, senior vice president of Blackhawk’s US retail business. “For example, we enable spas to sell their own branded giftcard or e-gift on their own website—we call this Hawk Direct. We will be able to expand Hawk Direct to spas, which will grow their branded value with … their customer base.”
- The terms of the deal were not disclosed.
- John Bevan, Spafinder Wellness COO, will lead the Spafinder business for Blackhawk.
- Chairman & CEO Pete Ellis and President Susie Ellis have both stepped down to focus on other ventures.
- Global Wellness Summit (GWS) and Global Wellness Institute (GWI)—both founded by Pete and Susie Ellis—are not part of the deal, with Susie Ellis continuing as head of both.
BED BATH & BEYOND ACQUIRES PERSONALIZATION MALL
WHO: Personalization Mall is an online seller of personalized products across categories using methods such as sublimation, embroidery, digital printing, engraving, and sandblasting to customize products for consumers and offer rapid fulfillment.
WHY: Bed Bath & Beyond can leverage PersonalizationMall.com’s fully-integrated, proprietary technology platform to drive additional omnichannel offerings across its concepts. The acquisition of Personalization Mall allows the retailer to scale its offering and feed the consumer’s demand for the ability to personalize. It also furthers their mission to provide differentiated products, services, and solutions to its customers.
IN THEIR WORDS: Steven Temares, CEO and Member of the Board of Directors of Bed Bath & Beyond, said: “We view personalization as a significant opportunity for us to create additional differentiation and enable us to do more for and with our customers.”
- Bed Bath & Beyond acquired Personalization Mall for approximately $190 million funding the transaction using cash on hand.
- Transaction expected to be slightly accretive to fiscal 2016 earnings.
- The acquisition of PMall.com is not anticipated to have a material effect on Bed Bath & Beyond’s fiscal 2016 third quarter ending on November 26, 2016.
- Financial advisor to Bed Bath & Beyond was Goldman, Sachs & Co.
- PersonalizationMall.com was advised by William Blair.
PACIFICA RECEIVES GROWTH EQUITY FROM ALLIANCE CONSUMER GROWTH
WHO: Founded in 1997 by dynamic wife and husband team Brook Harvey-Taylor and Billy Taylor, Pacifica’s product portfolio spans several beauty sub-categories including skincare, cosmetics, bath and body, fragrance, hair care, and nail care products. Pacifica’s natural-focused beauty products are currently sold in leading retailers including ULTA, Target, Whole Foods Market, Sprouts, and others. As an innovative, vegan, cruelty-free and award-winning brand, Pacifica is at the forefront of the “better-for-you” beauty revolution. Pacifica has proven to be the breakout brand that truly bridges naturals and mainstream beauty.
WHY: ACG’s investment will enable Pacifica to fuel continued product innovation and distribution expansion. No stranger to green brands, ACG has invested in both the beauty and food sector including NudeStick, Tata Harper, Babyganics, and EVOL Foods. Given ACG’s track record—Babyganics (acquired by SC Johnson), Shake Shack (completed an IPO), and EVOL Foods (acquired by Boulder Brands)—I think it’s safe to assume a sale is in the cards.
IN THEIR WORDS: “ACG and Pacifica are a perfect match. We both have been innovative in our respective industries and have worked on the fringes of the mainstream. What ACG saw in Pacifica was not a hero sku, but a true lasting brand,” said Harvey-Taylor. “While ACG’s portfolio is impressive, it’s their super optimistic spirit and love of great products that made us want to partner.” Billy emphasizes, “We weren’t just looking for money, we wanted a shared vision for the future. They’re big picture people, and we’re a brand with big plans.”
- Alliance Consumer Growth (“ACG”) made a significant minority investment in Pacifica.
- Vennette Ho, Managing Director at Financo, served as financial advisor to Pacifica
BEAUTY ELITE GROUP ACQUIRES FUEL HAIR
WHO: FUEL was founded in 2014 by a small group of industry specialists based on understanding the challenges and day-to-day life of true stylists. The business is dedicated to education and the high-performance reliable products that complete the curriculum. The range is sold only in the professional salon channel.
WHY: Beauty Elite Group seems committed to a strategy focused on the professional channel so FUEL is the perfect addition. Current brands include blowpro, Petsilk, sosilk, FUEL Hair, and Click-n-Curl.
IN THEIR WORDS: “As a company looking to grow our hair and cosmetics acquisitions and licenses, FUEL Hair is a fantastic addition to our portfolio of professional brands. Its proposition of catering to stylists’ education is a unique niche that we’re excited to expand,” said Basim Shami, Owner & CEO, Beauty Elite Group.
- Beauty Elite Group acquired FUEL Hair for an undisclosed amount in a private sale.
ESTÉE LAUDER ACQUIRED TOO FACED
WHO: Too Faced was created in 1998 by Jerrod Blandino and Jeremy Johnson, who worked behind the counter for Estée Lauder in Southern California. The ultra-feminine, irreverent names and high-quality, innovative formulas have proven to be a recipe for success. With 7.8 million followers on Instagram and 7.3 million followers on Facebook, Lauder has earned an authentic relationship with millennials that has fueled the brand’s growth at retail.
WHY: Estée Lauder is making its mark in the millennial specialty and digital landscape through the acquisition of Becca in September, and now, Too Faced.
IN THEIR WORDS: Fabrizio Freda, President and Chief Executive Officer, noted, “The acquisition of Too Faced is complementary to our portfolio of brands because it has a unique feminine and Millennial communication focus, which is really complementary with very little cannibalization with the rest of our makeup portfolio.”
- Estée Lauder acquires Too Faced for $1.45 billion.
- Too Faced is expected to reach more than $270 million in net sales in 2016. This represents growth of more than 70% for the year and 60% compounded annually over the past three years.
- General Atlantic took a majority stake in Too Faced in June 2015 at a valuation of about $500 million. That valuation increased nearly threefold over the past 18 months.
- In 2015, majority owner private equity firm Weston Presidio Capital put the brand up for sale. There were rumors of Estée Lauder’s interest at that time but ultimately the brand sold to General Atlantic.
- In 2012, founders Jeremy Johnson and Jerrod Blandino sold a majority stake to San Francisco–based Weston Presidio for $71.3 million.
- Too Faced CEO Eric Hohl will report to John Demsey, Executive Group President. Too Faced will be added to the portfolio of brands he oversees at Estée Lauder.
- The Estée Lauder Companies Inc. received financial advice from Evercore and BNP Paribas, and legal counsel from Lowenstein Sandler LLP.
- Too Faced received financial advice from Goldman, Sachs & Co. and Jefferies LLC, and legal counsel from Paul, Weiss, Rifkind, Wharton & Garrison LLP.
EDGEWELL ACQUIRES BULLDOG
WHO: Launched ten years ago by Simon Duffy, Bulldog is a UK-based men’s grooming and skincare product line with global distribution to over 17,000 retailers in 14 markets. Their largest markets are the UK, US, Sweden, and South Korea.
WHY: The acquisition of Bulldog will expand the men’s product portfolio for Edgewell, whose products include Schick and Wilkinson Sword razors and Edge shave gel.
IN THEIR WORDS: Colin Hutchison, Edgewell’s Vice President of Commercial International, comments, “As a challenger company in men’s grooming, Edgewell has continuously pressed beyond category conventions and leaders, to bring unique innovation to market for the benefit of our customers, consumers, and Edgewell shareholders. Bulldog has created an exciting and fast growing brand, by bringing that same challenger approach to men’s skincare, providing differentiated products that focus on a simple, straightforward message for men. Bulldog is a natural fit for Edgewell, and this acquisition creates opportunities to expand our personal care portfolio in a growing global category where we can leverage our large geographic footprint.”
- Financial terms were not disclosed.
- The transaction was funded from operating cash and will not have material effect on fiscal 2017 expected financial results.
- St. Louis-based Edgewell was spun out in July 2015 from Energizer Holdings Inc.
- Dentons advised Edgewell Personal Care Holdings UK Limited (“Edgewell”), a UK subsidiary of the US-based Edgewell Personal Care Company, on its acquisition of Bulldog Skincare Holdings Limited (“Bulldog”)
OH MY CREAM RAISES $6.5 MILLION
WHO: Oh My Cream was founded in 2012 by Juliette Lévy, who parlayed her passion into a profession when she was fresh out of ESSEC business school. The four-year-old French retailer sells a highly curated selection of beauty products both online and through its own store network. Today, Oh My Cream sells more than 1,000 references with beauty expert advice online and via its five freestanding boutiques in Paris and Provence.
WHY: The financing from Otium will help back the French beauty retailer’s rapid expansion of freestanding boutiques which could quadruple the footprint to 20 locations within the next year.
IN THEIR WORDS: “The cosmetics market is undergoing a full change: A new generation of consumers with radically different expectations are establishing themselves. Digital is reinventing the ways of distribution and communication,” stated Antoine Fine, the partner who heads up Otium Capital’s consumer division. He added such entrants are destabilizing the industry stalwarts, and that Oh My Cream is a symbolic actor in this transformation.
- Otium Capital provided a cash injection of $6.5 million for expansion.
- This is the second round of financing. The initial funding of 1.6 million euro, or $1.7 million, came from angel investors and funded the opening of the first five shops and development of the website.
- According to WWD, Paris-based Otium Capital has already invested this year in the cosmetic and well-being space, by taking stakes in the Merci Handy hand-wash brand and Let’s Ride cycling studios.
ESTÉE LAUDER ACQUIRES BECCA COSMETICS
WHO: In 2001 BECCA was launched as a result of founder Rebecca Morris Williams’ quest for the perfect foundation, but the brand began to struggle after decisions on distribution, inventory, and finances left the business dead in the water. Luxury Brand Partners stepped in and Bob DeBaker took the helm five years ago as CEO and turned the business around by focusing on the complexion category, and reconciling distribution and reducing the number of storekeeping units from 350 to 150 SKUs. However, lightning struck when the brand’s Champagne Pop collaboration with makeup artist and YouTube sensation Jaclyn Hill sold out in 75 minutes at Sephora. According to sources, the highlighter now represents 15% of the company’s revenue.
BECCA was one of many beauty companies on the sale track. Earlier this year the brand hired Piper Jaffray to find the right buyer for BECCA. Multiple parties showed interest, with Castanea Partners and Main Post Partners getting close to a deal that fell apart late this summer. The due diligence process went slowly and the exclusivity period expired. In swooped Estée Lauder with a richer offer.
WHY: Estée Lauder acquires BECCA Cosmetics, representing Lauder’s first acquisition in the color space since Smashbox in 2010. This transaction comes on the heels of a string of acquisitions by the company of small to mid-size brands including By Kilian, Glamglow, Frederic Malle, Le Labo, and Rodin Olio Lusso.
IN THEIR WORDS:
“BECCA Cosmetics is a wonderful addition to our portfolio of prestige beauty brands,” said Fabrizio Freda, President and Chief Executive Officer of Estée Lauder. “Its unique focus on complexion products that flatter a wide range of skin tones, combined with its sophisticated yet accessible consumer and digital engagement across channels has inspired a devoted fan base.”
Bob DeBaker, President and CEO of BECCA Cosmetics, said, “The company has the scale and vision to help elevate BECCA to its next phase of growth while encouraging us to continue to build our unique brand equity. We believe that beauty products should reflect a diverse range of skin tones and help all women create a naturally beautiful, yet individual look – and ELC is incredibly supportive of our mission.”
- The price of the acquisition was undisclosed. The deal was originally estimated at roughly $200 million, according to Business of Fashion, but WWD reports the number was in the neighborhood of $230-$240 million.
- Expected to generate $80 million in revenue for 2016, up from $40 million in 2015.
BECCA Cosmetics is majority owned by Luxury Brand Partners since 2012, which also owns beauty brands Oribe, R&Co, and Smith & Cult.
- According to Luxury Brand Partners chief executive officer Tev Finger, they invested in 2012, when Becca was only doing about $3 million in sales, investing $7.5 million to turn Becca around.
- The executive team will remain in place, led by president and chief executive Robert DeBaker, and chief financial officer / chief operating officer James McPherson.
- John Demsey, Executive Group President, The Estée Lauder Companies Inc., will add BECCA Cosmetics to the portfolio of brands that he oversees.
- UBS served as financial advisor to Estée Lauder, while Lowenstein Sandler LLP served as legal counsel.
- BECCA Cosmetics received financial advice from Piper Jaffray and legal counsel from Greenberg Traurig.
- Earlier this year, Piper Jaffray was hired to find the right buyer for BECCA. Multiple parties showed interest, and this summer WWD reported that Castanea Partners and Main Post Partners were close to a deal that fell apart.
GHD ACQUIRED BY COTY
WHO: GHD, which stands for “good hair day,” launched in 2001 with £15,000 in 2001 from Bradford, West Yorkshire, after three entrepreneurs—Martin Penny, Gary Douglas, and Robert Powls—bought the rights to a Korean-developed hair-straightening iron. The brand entered the US market about ten years ago and had global distribution expanding into high-end retail and e-commerce from its foundation in the professional channel.
Coty became the global No. 2 in hair color and styling products through the $12.5bn purchase of Procter & Gamble’s specialist beauty business.
IN THEIR WORDS: “Not only do we expect GHD to strengthen our professional hair portfolio and enable Coty to provide even better hair solutions, but we also believe there is strong growth potential for GHD across several markets,” Coty Chief Executive Camillo Pane said.
- Coty will pay approximately $510 million in cash funded with a combination of cash on hand and available debt facilities.
- GHD was put up for sale in June by owner private equity firm Lion Capital, with bankers Rothschild overseeing an auction of the company.
- The company generated $216.3 million in revenue in fiscal year 2016.
- Sales have grown over 30% the past three years.
- In 2013, private equity firm Lion Capital acquired GHD in a deal valued at about £300m.
- Montagu Private Equity bought the company in 2007 for £160m.
- GHD will become part of the Coty Professional Beauty division.
- The brand will be managed as a stand-alone business under its current CEO, Anthony Davy, and management team.
- Anthony will report to Sylvie Moreau, President of Coty Professional Beauty.
- Lion Capital and GHD were advised by Rothschild & Co..
- Proskauer Rose LLP and Skadden Arps Slate Meagher & Flom LLP acted as legal counsel for Coty Inc.
IFF ACQUIRES FRAGRANCE RESOURCES
WHO: Fragrance Resources is a privately held, family-owned fragrance company founded in 1987 by Horst F.-W. Gerberding with facilities in Germany, North America, France, and China.
International Flavors & Fragrances (IFF) is a 127-year-old business focused on flavors and fragrance with a global footprint. The acquisition of Luca Meyers Cosmetics in 2015 expanded the company’s reach into cosmetic active ingredients.
WHY: This is a highly complementary bolt-on acquisition in line with IFF’s Vision 2020 business strategy.
IN THEIR WORDS: “Since 1987, the Fragrance Resources team has been a key player in faster-growing specialty fine fragrances—an important growth category,” said Nicolas Mirzayantz, group president for fragrances. “The addition of this outstanding company into the IFF family will help us strengthen our position in strategic areas and further penetrate the critical and accelerating regional customer base that we see as the engine of growth.”
- Terms of the deal were not disclosed.
- The transaction was funded from existing resources and is expected to add approximately $75 million in revenue and be modestly EPS accretive—both in 2017—excluding transaction costs.
- Silab has acquired Ecomeris, a startup specializing in film technologies and natural coating solutions.
- According to Fashionvest, Nykaa, a Mumbai, India-based online beauty and wellness shop, has raised an undisclosed amount of funding to expand beauty site to more of India. The investment came from Max Ventures and Industries Limited, the India-based investment arm of polypropylene film manufacturer MVIL.
- Evonik Industries AG has acquired the silica business of the US company J.M. Huber for $630M.
- Shiseido has established an internal venture capital organization, Shiseido Venture Partners as part of their Open Innovation platform. The initial funding is $25 million.
- O. Berk Company, LLC has announced the acquisition of VPI Packaging.
- Tricor Braun Holdings Inc. has been acquired by private equity firm AEA Investors LP from CHS Capital. Tricor Braun is one of the largest distributors of glass and rigid packaging in North America.
- Contract manufacturer Bentley Laboratories acquired Alliance Packaging Group Inc., adding the business to its manufacturing unit. In Q1 of 2016 Riverside Company provided Bentley an investment to fund both organic growth initiatives and bolt-on acquisitions.
- blow LTD, the London-based on-demand beauty services company, has acquired Return to Glory’s residential business. Return to Glory offers a similar at-home beauty service to blow LTD with added focus on waxing, massage, Pilates, and yoga—services which blow LTD has not offered up until now.
- Contract manufacturer Knowlton Development Corporation (KDC), acquired Thibiant International, Inc. Thibiant specializes in the formulation and manufacturing of personal and skincare products while also offering product development services, innovation R&D, quality and compliance assurance services, and manufacturing solutions. The acquisition of Thibiant will help KDC offer a more extensive line of products and services.
- Indian consumer goods manufacturer Dabur acquires South African–based CTL group of companies. Dabur has manufacturing facilities in Nigeria and Egypt along with other business on the continent.
- LG Household & Health Care, Ltd. has acquired the Asia Pacific business of Reach brand oral care from Johnson & Johnson PTE Ltd., for an undisclosed amount.
- Bell Flavours & Fragrances acquired the Singapore fragrance arm of chemical ingredients distributor Nardev Chemie.
- Walmart invested $50 million in New Dada as an extension of their partnership with JD.com. Dada is China’s largest online grocer and on-demand platform with 25 million+ consumers in 300 cities. Walmart’s intention is to capitalize on Dada’s logistical network to support their existing footprint of 426 stores in 170 cities.
- Ritual, a California-based wellness startup, raised $3.5 million in seed funding. The company has raised $5 million to date. Forerunner Ventures led the investment, along with Norwest and NEA, and previous investors Upfront Ventures and Rivet Ventures.
- Ant Bridge, a Japanese private equity investment fund, acquired Kagayuaku Cosmetics (previously Sojitz Cosmetics), a manufacturer based in Japan.
- JAKKS Pacific, Inc. (NASDAQ: JAKK), a designer, manufacturer, and marketer of toys and consumer products, acquired C’est Moi an innovative skincare and makeup brand specifically formulated for kids 4-12 years old for an undisclosed sum.