Consumer Products M&A Continued to Rebound in 2Q, Direct-to-Consumer Companies Led the Way
Consumer M&A deal volume in North America during 2Q 2021 was up over 80% compared to the same period last year, when the impact of COVID caused a significant slowdown in activity. Investors are now making up for lost time, and mergers and acquisitions deal volume is back on par with the strong levels of 2018 and 2019. We expect deal activity to remain strong through 2022.
A significant portion of consumer products M&A deals in the second quarter involved acquisitions of direct-to-consumer companies. DTC deals included Unilever’s acquisitions of Paula’s Choice and The Carlye Group’s acquisition of Beautycounter. DTC indie brands that received growth capital included Athena Club, Act+Acre, Let's Disco, and more. A growing number of e-commerce aggregators also acquired DTC or Amazon brands, and online marketplace company Faire raised $260 million.
Given the surge in online purchases over the past year, acquirers and investors have predictably focused on digitally native brands with strong capabilities in online customer acquisition, conversion, and retention.
M&A activity has surged back to pre-COVID levels, but most deal activity has been concentrated in either big acquisitions by strategic buyers, or growth capital for small DTC brands. So far, a relatively limited number of mid-sized deals have closed post-COVID. This is largely due to limited supply of strong mid-sized deals on the market, not a lack of interest from buyers. Many owners of mid-sized brands have been completely focused on managing their businesses through COVID, and are just beginning the process to consider a sale. We expect to see more mid-sized deals announced moving forward, as companies currently on the market announce transactions, and as founders who are considering an exit start the process to sell.
Valuations are generally strong, but companies that experienced a significant increase in sales during COVID present some unique issues. Sellers generally hope to capture valuations that reflect their recent growth. But buyers want reassurance that revenue growth will be sustainable in a post-COVID environment. While an earn-out or other variable structure may help address potential differences in valuation opinions, some buyers and sellers are taking a wait-and-see approach. Some sellers are waiting to put their businesses on the market until they can demonstrate strong ongoing sales in 2021. Expect to see some of these businesses come onto the market in late 4Q or early 2022.
We expect consumer products M&A to continue to gain traction as sellers adapt to the post-COVID business environment, recognize the current appetite by buyers, and seek to sell before potential tax hikes in 2022.
Strong buyer demand and a positive environment can help drive the success of an M&A transaction. But as always, the best way to sell any business is to understand your goals, priorities, and options; prepare for the sale process; and execute an organized M&A process designed to obtain offers from qualified buyers.
Select United States Beauty and Personal Care Acquisitions in 2Q 2021
Beautycounter sold a majority stake to private equity firm The Carlyle Group for $1 billion. Formed in 2013, Beautycounter has previously raised capital from TPG Growth and MoussePartners.
Unilever acquired Paula’s Choice from TA Associates and Bertram Capital Management, reportedly for $2 billion. Unilever also acquired Texas-based supplement company Onnit, which comes on the heels of the acquisition of Smarty Pants Vitamins in December and hydration company Liquid IV in September last year.
Nestle acquired The Bountiful Company from KKR for $5.75 billion,representing a multiple of 3.1x sales and 16.8x EBITDA as of March 31, 2021. TTM net sales were $1.87 billion with an EBITDA of 18.3%. Nestle also recently acquired Nuun & Company from TSG.
UK-based The HUT Group (THG) acquired NJ-based prestige manufacturer Bentley Laboratories for $255M from The Riverside Group, for a reported 17x EBTIDA multiple. Bentley currently manufactures products for THG’s Perricone brand, and this acquisition allows THG to bring production in-house and to speed up production. The acquisition comes on the heels of a $1B fundraising deal by THG.
Helen of Troy sold its mass market personal care brands (Alberto VO5, Zest, Sure, and others) to HRB brands (aka High Ridge Brands, owned by Tengram Capital) for $45 million.
Sustainable beauty brand EcoFabulous was acquired by Amyris. This year Amyris has also acquired hand sanitzer brand Olika, AI company Beauty Labs International, and skin care brands Costa Brazil and Terasana.
Hatch Beauty Brands acquired consumer analytics company Trendalytics.
Hand In Hand soap sold to Bain Capital.
Prestige Cosmetics was acquired by DTC lingerie company Adore Me.
Skincare brand Asterwood Naturals was acquired by DTC platform aggregator Boosted E-commerce.
Select Capital Raises in 2Q 2021
Online marketplace Faire raised $260 million from Khosla Ventures, Y Combinator, Sequoia Capital, and others.
DTC hair-care brand Vegamour received $80M in funding from private equity firm General Atlantic. Vegamour is reportedly ready to launch in retail.
Shopshops raised $15M in a Series B round from Forerunner Ventures and Union Square Ventures, as well as a syndicate from Gaingels.
DTC brand Athena Club raised $15M in a series A round, led by Cue Ball Capital, with participation from Shazi Visram, founder of Happy Baby. Athena Club sells skincare, supplements, and period care products.
NYC-based DTC hair-care company Act + Acre raised $7M in growth capital.
Sexual wellness brand Maude raised $5.8M in growth capital.
DTC men’s brand Let’s Disco raised $5M in capital from Midnight Venture Partners.
Menopause wellness brand Kindra raised $4.5M, led by Female Founders Fund, Primetime Partners, Katie Couric Media, and others.
DTC makeup brand Violette-FR Raised $2.75M from Greycroft Partners, FFF Management, Felix Capital Partners, and SuperOrdinary.
Multi-tasking DTC beauty brand Iris&Romeo raised $2M in seed funding from the Brand Project.
Dallas-based Buff City Soap raised capital from General Atlantic Service Co.
Pre- and post-natal vitamin company MOM Enterprises raised capital from Swander Pace and Stellus Capital Management.
DTC brand Faculty World raised $3M from Estee Lauder Companies, Rare Breed Ventures, and others. Faculty World manufacturers and sells nail products for men.
San Francisco based DTC company Fait avec Coeur raised capital from Audrey Capital.
NYC-based makeup brand Ami Cole raised $1M from Greycroft Partners and Imaginary Ventures.
Sky Organics raised an undisclosed sum from Nexus Capital Management.
DTC Baby care company Noleo Care raised capital from Inbound Capital.
Skin-care essentials brand Ernest Supplies raised $1M in venture capital.
Bloomeffects raised $2M in VC funding. Sales are expected to reach $3.7M in 2021. Bloomeffects is carried in Blue Mercury, Credo, Saks, and Neiman Marcus.
Ceremonia raised $2M from Silas Capital and Beliade.
Retail hair-care brand Mielle Organics sold a minority stake to Berkshire Partners LLC.
Clean beauty brand Osea received a minority investment from Cavu Ventures.
Online retailer The Fascination received $1M in venture financing.
We would love your feedback, insight and comments. Contact us!
About Hughes Klaiber
Hughes Klaiber is an investment banking firm based in New York City. We help clients turn a desire to exit their business into a successful sale that meets their personal and financial goals. If you are considering a sale of your business, please give us a call. We would be happy to share our insight into the current M&A market, learn more about your business, and discuss how we may be able to assist you. Schedule an introductory call here.