Ads
Translated by
Nicola Mira
Published
Sep 29, 2017
Reading time
2 minutes
Download
Download the article
Print
Text size

Mergers & acquisitions fever still running high in beauty industry

Translated by
Nicola Mira
Published
Sep 29, 2017

According to corporate finance advisory firm Capitalmind, the mergers and acquisitions scene in the cosmetics industry is entering a new phase, in which beauty companies with medium-sized market capitalisation must "quickly reach a critical size or link up with world leaders."


Concealers by Too Faced, a cosmetics brand bought by the Estée Lauder group in November 2016 - Instagram


Nyx, Becca Cosmetics, Le Labo, Francis Kurkdjian, Frédéric Malle, Atelier Cologne, Carver Korea and Too Faced: in the last few years, the number of make-up, skincare and fragrance brands snatched up by major groups or investment funds has greatly increased. Capitalmind noted that, currently, two or more cosmetics industry merger operations are taking place worldwide every week. In the course of the last five years, Europe was the leading arena for industry M&A, with 36% of transactions, ahead of the USA (31%).

"Thirty beauty corporations share 63% of the market among them. Compared to other industries, the cosmetics sector is still highly fragmented," said Nicolas Balon, a partner at Capitalmind. Behind the five beauty industry leviathans, L’Oréal, Estée Lauder, Coty, Shiseido and Beiersdorf, a large array of smaller brands split among themselves the remaining share of the market, approximately 40%. These companies often need fresh capital to continue to grow or to accelerate, while major groups and investment funds are always on the lookout for innovative brands which offer new perspectives on the beauty market and respond to its consumers' new expectations.

Make-up brands seem to be the most coveted of all: in 2016, make-up sales worldwide increased by 8.4%, while the global beauty market recorded a 5% growth, up to €205 billion. Not surprisingly, in the last five years, 38% of M&A transactions involved make-up brands, 32% involved skincare brands, while a 15% share involved both fragrance and haircare brands respectively.   

This scenario has led to very high valuation levels. In November 2016, Estée Lauder bought make-up brand Too Faced for $1.45 billion: the brand generates $270 million in revenue, and its growth rate is 70%. But by acquiring a brand with 9.3 million Instagram followers, the US cosmetics group has gained a foothold in the much-coveted Millennials segment.

Besides make-up brands, driven by the selfie generation, Capitalmind noted that, among the players to follow closely, there are those in the active beauty and natural beauty segments, as well as beauty apps.

Copyright © 2024 FashionNetwork.com All rights reserved.