02.16.10
A sharp rise in investment activity involving natural personal care companies is expected in 2010, according to London-based Organic Monitor.
Improving economic conditions and easing of capital restrictions are making investors target this high-growth sector once again. The natural personal care industry was the darling of the investment community until the financial crisis started in 2008.
After a lull period of 18 months, major deals have restarted. Bare Escentuals has been acquired by Shiseido in a $1.7 billion deal, while the cosmetics company Clarins recently completed its purchase of Kibio.
Organic Monitor sees more such deals on the horizon as investors once again start pursuing natural personal care companies. Investors are attracted by high market growth rates and profitable product categories. European companies are expected to be involved in major deals in 2010 because of the lack of “investable” companies in North America. Many leading American companies have already been acquired, leaving relatively few suitable privately-owned companies. In contrast, Europe has a high concentration of sizeable private companies.
In its new Strategic Insights report, Organic Monitor analyses Investments, Mergers and Acquisitions in the global natural personal care industry. The report gives details of major deals, the companies involved, investment rationale and impact, as well as future projections.
The research shows that most deals have been in North America where companies —such as Bare Escentuals and Burt’s Bees—have been purchased at more than 3-5 times their sales revenues. High prices are being paid by investors looking to emulate Estee Lauder’s success with Aveda. Since its purchase in 1997, Aveda has grown manifold to become a global brand of natural personal care products.
The report finds the most successful natural personal care companies are those that receive investment and continue to operate as separate entities. Aveda and Burt’s Bees are cited as such companies that have continued to show positive growth. In comparison, those that have been acquired and integrated into larger corporations have not realized their growth potential.
A major reason is that natural personal care companies are typically small enterprises with strong ethical values, which do not always fit well into larger profit-driven organizations.