Q2 2015
Beauty Care M&A Report
Beauty Care M&A Heats Up This Summer
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Beauty Care M&A Heats Up This Summer
Q2 2015
M&A activity in the Beauty Care sector ramped up in the second quarter of 2015 with 22 deals. This is the highest number recorded in the
past three years, pushing the total to 41 for the first half of 2015, 14% over the same period in 2014. Intrepid anticipates continued strength
in beauty care M&A in the second half of 2015. Q2’15 beauty care M&A highlights include:
• Deal volume in Q2’15 rose more than 45% from Q2'14 and 15% from Q1'15.
• Intrepid continued its success in the sector announcing its advisory role in two high profile deals: the sale of Too Faced Cosmetics
to General Atlantic and the sale of Chatters Canada to ONCAP.
• Unilever flexed its M&A muscles with three acquisitions of premium skin care brands in the quarter and four over the past five
months.
• P&G delivered on its promise to shed non-core beauty brands with the announced sale of 43 brands to Coty and the sale of the
Frédéric Fekkai luxury hair care brand.
• Private equity groups continued to stay active on the beauty care front with M&A activity from both Tengram Capital Partners and
Yellow Wood Partners.
Steve Davis, Managing Director, Head of Beauty & Personal Care, SDavis@IntrepidIB.com
Recently Closed Transactions
Too Faced Cosmetics Acquired by General Atlantic – Too Faced Cosmetics, a portfolio company of Weston Presidio, sold
a majority stake of the company to private equity firm General Atlantic. Too Faced is a leading independent prestige
cosmetics company specializing in high-quality and innovative make-up products sold worldwide through beauty retailers,
home shopping networks, and the company’s own Website. Founded in 1998 by Jerrod Blandino and Jeremy Johnson, Too
Faced inspires confidence and encourages women to “own your pretty.” The Too Faced founders and senior management
team will retain significant ownership in the company. Intrepid acted as an advisor to Too Faced on the transaction.
Chatters Partners with ONCAP to Accelerate Growth – Chatters Canada, the largest retailer of professional hair care
products in Canada and one of the largest hair salon operators in the country, was acquired by ONCAP, the middle-market
private equity platform of Onex Corp., in partnership with the existing management team. Founded in 1990 in Red Deer,
Alberta, Chatters operates more than 100 stores spanning eight provinces. The Chatters model combines a unique balance of
retail sales and salon services revenue under one roof, resulting in a differentiated and powerful one-stop professional beauty
care format. Intrepid served as exclusive financial advisor to Chatters on the transaction.
Unilever Makes Major Push into Premium Skin Care – Over the past five months, Unilever has acquired four premium skin
care brands: Murad, Dermalogica, Kate Somerville and REN Skincare. Based in Los Angeles, Murad is a leading clinical skin
care brand sold through specialty retailers, department stores, pharmacies, spas and salons in over 42 countries.
Dermalogica, also based in Los Angeles, is a professional skin care brand offering a range of products for both in-home and
for professional skin therapists in more than 80 countries. Headquartered in Beverly Hills, Kate Sommerville markets a range
of prestige skin care, body and sun care products. Based in the U.K., REN Skincare is a natural, premium skin care brand sold
predominantly through pharmacies and specialty stores. All of these brands will be incorporated into Unilever’s Prestige
division, which is exclusively dedicated to premium personal care brands. Unilever's Personal Care business recorded $5.4
billion in sales in the Q1’15, accounting for 37% of the company's total sales.
Advent Scraps Douglas IPO for Sale to CVC Capital – Days after the German cosmetics and perfume retailer Douglas AV
opted to list on the Frankfurt stock exchange, Advent International agreed to sell Douglas to CVC Capital Partners. Founded in
Hamburg in 1821, Douglas is the largest specialist beauty retailer in Europe with more than 1,700 stores in 19 countries and
with market leading positions in 11 countries and pro forma annual sales of EUR2.5 billion. According to industry sources, the
transaction values Douglas at roughly US$3.1 billion, representing a revenue multiple of 1x and an EBITDA multiple of over
12x. The Kreke Family will maintain a 15% stake in the company, and Henning Kreke will continue to serve as CEO. The
transaction is subject to regulatory approval.
Coty Selected to Purchase Procter & Gamble Beauty Care Brands – As part of P&G’s plan to focus on fewer, higher
growth and core brands, P&G agreed to sell 43 beauty brands to Coty in a deal valued at an estimated $12.5 billion. The 43
brands generated sales of $5.9 billion and adjusted income of $1.15 billion, implying a revenue multiple of over 2x and an
earnings multiple of over 10x. The acquisition will include Wella, Clairol and Sebastian hair care brands; Cover Girl and Max
Factor color cosmetics brands; and Gucci and Hugo Boss fragrance brands. P&G will retain certain core beauty and personal
care brands including Head & Shoulders, Herbal Essences, Aussie, Gillette and Olay. Post transaction, P&G shareholders will
own 52% of the combined business, while Coty's existing shareholders will own 48%, with Coty shareholder JAB Holdings
owning a third of the combined entity. The transaction is expected to close in the second half of 2016.
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Recently Closed Transactions (Cont.)
Proctor & Gamble Divests Frédéric Fekkai – Designer Parfums CEO and LUXE Brands Founder and CEO formed a joint
venture to acquire the Frédéric Fekkai luxury hair care brand and salons from Procter & Gamble. According to industry
sources, Proctor & Gamble acquired the brand from Catterton Partners in 2008 for an estimated $440 million, but sold the
business in June 2014 for a fraction of that price. Designer Parfums also purchased the skin care brand DDF Skincare from
Proctor & Gamble in 2014.
Tengram Capital Invests in This Works – Tengram Capital Partners has partnered with This Works Products Ltd., a natural
beauty brand that develops and markets aromatherapeutic beauty products across the body care, skin care and sleep
categories, including a dedicated range of products created to address beauty through improving sleep. The company sells
through a diverse set of health and wellness, specialty beauty and third-party ecommerce retailers and through its own
Website. In conjunction with the Tengram investment, the company plans to drive growth in its core U.K. market and to launch
the brand in the U.S. market.
TPR Holdings Acquired Mallygirl – Beauty Visions LLC, an affiliate of TPR Holdings, announced the acquisition of Mallygirl,
LLC out of bankruptcy. Founded by makeup artist Molly Roncal, Mallygirl is a popular color cosmetics brand sold primarily on
QVC, in Ulta and online. The acquisition will enable Mallygirl to emerge from bankruptcy and position the brand for rapid
growth. TPR Holdings owns and operates other well-known beauty brands such as Cargo, Oscar Blandi, Freeze 24/7 and Zirh
Men’s Skincare.
PDC Acquired Bodycology and Cantu – PDC Brands announced the acquisition of specialty bath brand Bodycology and
multi-cultural hair care brand Cantu from Advanced Beauty Inc. Backed by private equity firm Yellow Wood Partners, PDC
Brands is a provider of beauty, personal care and wellness brands, including Body Fantasies, BOD Man, Dr. Teal’s and
Calgon, with a focus on the mass market. PDC Brands purchased the Dr. Teal’s brand from Advanced Beauty in 2014.
According to industry sources, PDC sales are estimated at $400 million.
Industry News
Ulta Increases Growth Plan – Ulta Salon, Cosmetics & Fragrance reported 22.2% second quarter sales growth and has
plans to accelerate its expansion strategy. The beauty and fragrance retailer seeks to expand eCommerce to 10% of sales (up
from a current 4%), increase comparable store sales at a 5% to 7% rate, and open more than 100 doors per year—with the
goal to reach over 1,200 doors by 2019 (from approximately 800).
L’Oréal Paris Ranked Most Valuable Beauty Brand in 2015 – Brand Finance ranked L’Oréal Paris first in brand value in its
list of Top 50 Cosmetics Brands for the second year in a row. L’Oréal received an AAA+ rating, which Brand Finance’s CEO
David Hugh explains: “To be an AAA+ brand, the brand has to be excellent across all measures…L’Oréal has pulled off the
trick of simultaneously capturing the mass market while maintaining an air of exclusivity.” The brand rating is a benchmark of
strength and future potential. Other brands in the top 10 include Gillette, Dove, Pantene, Nivea, Chanel, Estee Lauder,
Garnier, Olay and Lancome.
Fake Buyout Bid for Avon Leads to SEC Lawsuit – A bid from alleged British investment firm PTG Capital to buy Avon for
3x its equity value turned out to be fraud. The $8.2 billion offer caused Avon’s shares to soar by nearly 20% before typos and
inconsistencies in the filing raised suspicion about its legitimacy. An investigation concluded that a 37 year old Bulgarian
resident was responsible for the fake takeover bid. Avon later confirmed it had not received an offer from PTG.
Millennials Looking for Product Quality and Value in Beauty Products – A Bank of America report found that 80% of
millennial women felt “value” and “product quality” were the biggest influences on their purchases of beauty products. Pricier
cosmetic brands are losing their millennial audience as these women are choosing easily accessible, affordable products.
CoverGirl topped the list of Millennials Top 25 Beauty brands followed by Maybelline, Neutrogena and Clinique. The brands
outscored more expensive lines like Chanel and Olay.
Slated Coty CEO Reconsiders Role – A week before cosmetics and fragrance maker Coty Inc. expected Elio Leoni Sceti to
begin his position as CEO, he “reconsidered and decided not to join Coty.” The company will pay him $1.8 million in severance
and $55,000 to buy back his preferred stock. The current interim CEO, Bart Becht, will continue in the role until Coty can
reevaluate its business strategy.
Kohl’s Expands Prestige Beauty Presence – As of June, Kohl’s outfitted approximately 500 of its 1,164 stores with
expanded prestige beauty departments and plans to accelerate the rollout to the majority of doors by early 2016. The Kohl’s
beauty department ranges from 500 to 800 sq. ft. with attractive prestige brands, including Bliss, Lorac Cosmetics, Cargo
Cosmetics, Pür Minerals and Fekkai hair care. Its growing beauty department will be key for Kohl’s to meet its goal of $2 billion
in incremental revenue over the next several years and total revenue of $21 billion by 2017.
Estee Lauder Seeks Luxury Users Through Acquisitions – Estee Lauder is seeking acquisitions to help expand the brand's
presence in key market segments. By targeting more brands in the luxury beauty segment, the company aims to capture a
bigger share of the ultra-prestige consumer market and utilize its advanced R&D to further the brand's global influence. Estee
Lauder aims to generate at least 1% of total sales growth over the next three years through acquisitions.
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Publicly Traded Companies (USD Millions)
Last Twelve Months
Company
Revenue Growth
Enterprise Value / LTM
Enterprise Value
Market Cap
Revenue
Gross Profit
EBITDA
1-year
3-year
Revenue
EBITDA
$4,633
$2,724
$8,462
61.7%
8.7%
(12.6%)
(8.1%)
0.5x
6.3x
$16,517
$18,753
$7,019
62.4%
15.5%
3.8%
3.3%
2.4x
15.1x
$14,072
$11,518
$4,417
59.6%
16.6%
(3.3%)
(1.4%)
3.2x
19.2x
$807
$425
$987
41.9%
(1.6%)
(20.4%)
(7.3%)
0.8x
NM
$32,830
$32,792
$10,981
80.5%
19.5%
3.1%
4.2%
3.0x
15.3x
$915
$1,051
$487
51.2%
13.7%
3.2%
(10.2%)
1.9x
13.7x
$98,596
$97,934
$24,732
71.1%
20.6%
1.8%
1.7%
4.0x
19.4x
$3,564
$1,925
$1,910
66.2%
16.3%
16.5%
11.3%
1.9x
11.4x
$8,992
$8,940
$6,274
74.7%
8.4%
2.1%
4.9%
1.4x
17.0x
Mea n
63.3%
13.1%
(0.6%)
(0.0%)
2.1x
14.7x
Medi a n
62.4%
15.5%
2.1%
0.0%
1.9x
15.2x
Five-Year Historical Trading Multiples
TEV / EBITDA Multiples
TEV / Revenue Multiples
18.0x
2.5x
15.0x
2.0x
12.0x
1.5x
1.0x
9.0x
5-Year Average: 1.5x
5-Year Average: 11.2x
6.0x
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
0.5x
Jun-10
Global Beauty Care Equity Price Performance
50%
Past Three-Month Equity Price Performance
(30%)
Jun-14
Jun-15
# of Announced Beauty Care Transactions by Quarter
27.8%
22
21
16
15
20
19
15
4.3% 4.0%
Inter Parfums
10
(10%)
Jun-13
30
20
10%
Jun-12
Global Beauty Care M&A Transactions
38.0%
30%
Jun-11
(2.2%) (3.7%)
6
(8.6%) (10.8%)
(21.6%)
0
Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15
Note: Indices calculated using a median equally-weighted basis; All data sourced from S&P Capital IQ as of 6/30/2015.
11755 Wilshire Blvd., Suite 2200, Los Angeles, CA 90025 ● T 310.478.9000 ● F 310.478.9004 ● IntrepidIB.com
Beauty & Personal Care Practice
Cosmetics
Hair Care
Skin Care
Professional
Products
Natural Products
Fragrances
Body Care
Equipment / Tools
Select Transactions
dba
and its subsidiaries
has been acquired by
a portfolio company of
has been acquired by
a portfolio company of
has received a growth
equity investment from
has been acquired by
A subsidiary of
has been acquired by
in partnership with the existing
management team
*
*
in partnership with Chief
Executive Officer David Berglass
Continental Fragrances, Ltd.
dba
a portfolio company of
has been acquired by
has been acquired by
has received a growth
equity investment from
has been recapitalized by
has sold a majority stake to
owners of
in conjunction with Too Faced
founders and senior management
*
*
*
*Executed by principals of Intrepid while at previous firms.
Beauty & Personal Care Team
Steve Davis
Shahriar Attaie
Managing Director
SDavis@IntrepidIB.com
Vice President
SAttaie@IntrepidIB.com
About INTREPID
Intrepid Investment Bankers is a specialty investment bank that
provides M&A, capital raising and strategic advisory services to
middle-market companies across various industry sectors. We have a
unique culture rooted in our founders’ successful 30-year history of
advising entrepreneur and family-owned businesses, financial
sponsors and major corporations. We believe that every company has
an entrepreneurial passion that drives it and a story that defines
it. We deliver unconventional results through our unique ability to tell
each client’s story, and drive relentless execution through senior
banker immersion in each process. We augment our international
capabilities through our membership and active participation in M&A
International Inc., an exclusive global alliance of select independent
middle-market M&A advisory firms. Follow Intrepid IB
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