Beauty industry M&A activity on the up, report shows

The report, entitled Buying Into Beauty, and published by Mergermarket, shows that the number of merger and acquisition deals grew to 70 completed in 2012, compared to 63 in 2011.

However, what is perhaps even more interesting is the fact that the value of these deals increased approximately three-fold, which the researchers state is due to the fact there is now more product types being sold through more retail channels and in more markets, which has also served to help keep the activity high.

With regards to specific categories within the industry, the report highlights the fact that growth in skin care continues to drive business activity, with medical dermatology and products for sensitive skin proving particularly successful.

M&A activity reflecting this trend included Allergan’s acquisition of UK brand SkinMedica and the equity investor acquisition of LR Health and Beauty Systems.

Anti-aging remains on the shopping list​

Anti-aging also remains an important aspect of the skin care market and is on the radar for investors due to the fact that an aging world population concerned with retaining youthful looks is always on the look out for effective products.

Although there were no significant deals made in this segment during the course of 2012, the report highlights the 2011 acquisition of Freeze 24/7 Skincare, which focuses on technologically advanced anti-aging skincare solutions, by TPR Holdings.

Likewise, color cosmetics is another area that has been providing dynamic growth for the industry, which has also been reflected in higher levels of M&A activity, highlighted by L’Oreal’s acquisition of US brand Urban Decay – a deal that enhanced the company’s prestige portfolio.

Emerging market deals go both ways​

Another key driver of growth in the industry, and one that is also driving M&A activity, is the emerging markets, which is an area that is also expected to be one of the key drivers of further activity in the short- to mid-term.

But interestingly, the report also highlights that this projected growth in M&A activity will not only feature Western companies from developed markets targeting the emerging markets, but also emerging market buyers targeting businesses in developed markets.

Finally retail and distribution channels are also expected to continue to drive further activity, highlighted by the fact that the biggest deal in 2012 was Walgreen’s $6bn acquisition of a 45% stake in UK-based retailer Boots Alliance.