Lessons Learned in 2020: Finance

Lessons Learned in 2020: Finance

What did happen?
M&A activity has been ripe for some time. An upsurge of private investors, the lure of digitally advanced brands perfectly appealing to an online-obsessed audience, and attractive prices has maintained the momentum for years. And 2019 was no exception. However, the glory days were cut short at the beginning of 2020, with COVID-19 forcing companies to put an immediate hold on purchases in favour of looking inwards and stabilising their own brands amidst a flurry of store closures and a drastic fall in sales. 

Yet while companies were keen to keep their finances close to home, M&A didn’t dry up completely. Kicking off the year in Q1, there were a limited number of acquisitions, all leaning heavily towards categories that mirror the new consumer habits imbedded during the pandemic. In the U.S. Helen of Troy purchased Drybar prestige haircare products, while P&G looked to further cement its lead in the grooming sphere with the acquisition of Billie. Colgate-Palmolive meanwhile looked to premium toothpaste, while Elf Beauty focused on the all-important wellness category, snapping up w3ll people for $27 million. Over in Asia, where the pandemic was fully ingrained, LG Household & Health Care struck a deal for Physiogel, while Sagawa bought out Shanghai Runbow Logistics and Technology. 

Going into Q2, execs, investors and decision makers finally grasped the true economic consequences and gravitas of the pandemic, with activity slowing. However, two of the year’s biggest acquisitions took place in the quarter, with Puig buying a majority stake in Charlotte Tilbury, while global investment firm KKR snapped up Coty’s professional beauty arm. L’Oréal placed its faith and finances in wellness with the purchase of Thayers Natural Remedies, while Omya closed on the acquisition of Formulae Development and Pura cleverly focussed on the pandemic survivors – suncare and CBD.

Ahead of the rest of the world and entering the initial stages of a COVID recovery, activity in Asia was slightly more forthcoming, and with the benefit of hindsight, came powerful intel on where to invest. Beauty packaging expert International Cosmetic Suppliers got a vote of confidence from private equity group ShawKwei and Partners, while in Korea fashion once again merged with beauty, with Handsome acquiring a majority stake in K-beauty cosmeceutical brand Cleangen for KRW10 billion. Having already witnessed the surge in e-commerce bolstered by store closures and lockdowns, Facebook inked a deal to become the largest majority shareholder in India’s JIO’s platforms, with Hindustan Unilever correctly anticipating the skyrocketing demand for hygiene, snapping up Glenmarks VWash brand from Glenmark Pharmaceuticals. Looking forward, AmorePacific was focussing on the long-game, acquiring a minority stake in Australian personalised skincare company Rationale. Over in Africa, e-tailer RunWaySale got an investment of R100 million from private equity firm SPEAR Capital – a sign of the importance being placed on e-commerce in the region. 

Going into Q3, cosmetic and personal care companies had clearly taken stock, and had used their pandemic pause as a time of introspection, shifting focus to agile brands in sectors outperforming in a new COVID-shaped market. Lululemon was quick to profit from the boom in at-home workouts, acquiring fitness tech start up Mirror, and with wellness besting the virus where other sectors failed it was little wonder that it was a key M&A market sector for many. Clean beauty guru Gwyneth Paltrow and Unilever Ventures invested in Saie Beauty, while tennis star Maria Sharapova put her eggs in tech wellness company Therabody’s basket. Meanwhile in the wake of the BLM movement Johnson & Johnson put its money where its marketing message was, ploughing a reported seven-figure sum in Black-owned hair care line Sunday II Sunday. Wellness continued to be a focus across the pond too, with India’s Lotus Herbals acquiring Vedicare Ayurveda. And it seems the popularity of the Kardashian brand failed to diminish in 2020, with Coty acquiring a 20 percent interest in the KKW Beauty.

As the pandemic eased in Asia, investment in the all-but-dead travel retail sector slowly but surely returned, albeit barely, with the DFS Group acquiring a 22 percent stake in Shenzhen Duty Free Ecommerce, and private equity firm Hahn & Company snapping up Korean Air’s inflight catering and duty free business for KRW990.6 billion.

The upcoming U.S. Presidential election may have caused further economic uncertainty in Q4, however, that didn’t stop the M&A activity happening a pace. And it seems nothing would stop e-commerce king Alibaba, which continued to blaze the acquisition trail. In another vote of confidence for travel retail, the e-giant acquired a 10 percent stake in duty free group Dufry, while Walmart beat a retreat from Japan, selling its majority stake in Seiyu to KKR. 

Across the pond Morphe announced the purchase of Gen Z favorite, Lipstick Queen, and Tiffany inevitably breathed a sigh of relief as the will they/won’t they LVMH buyout saga eventually came to a head, with the luxury goods company finally agreeing a new purchase price of $131.50 per share. Ipsy also made a purchase, acquiring rival BoxyCharm in a $500 million deal, while Peter Harf, ex-Coty CEO, upped its stake in the beauty company to US$150 million. 

What will happen next?
While M&A activity may not have been as zealous as previous years, as we know, the beauty industry is nothing if not resilient in times of austerity. The past year has highlighted that, even in the face of ongoing lockdowns, social distancing measures, retail closures and the loss of travel retail, the beauty industry is robust enough to adapt and invest. And while the year may have been somewhat muted, the growing sentiment of a global economic recovery is paving the way for a rise in M&A activity going forwards.

Indeed, as markets stabilize, there is a distinct focus on agile, digitally progressive brands – think more L’Oréal/Modiface-type acquisitions – and, with the industry having learnt its lesson from 2020, those that reside in lucrative pandemic sectors, such as wellness, health, skincare and hygiene, will be attractive prospects for investors. Interest will also be piqued in those that have solid digital strategies – we’re talking e-commerce and a strong social presence – as well as brands that have heeded the call for authentic diversity and inclusion strategies. 

However, despite cosmetic valuations seemingly back up to pre-COVID times, caution will remain. As a result, companies engaging in dialogue with potential new stakeholders will have to substantiate how they’ll sustain or recreate the 2020 revenue upturns once the world returns to a new normal post pandemic, whatever that may be. Speaking to WWD.com, Ilya Seglin, Managing Director at Threadstone Advisor, said, “People want to have these COVID-19 conversations in the rearview mirror and say, ‘This is our new normal, this is not a two-month bump.’ What is sustainable is what the private equity [firms] want to know.”

As the predicted K-shaped recovery squeezes out the middle, ultra-luxe and mass market will be the key sectors of interest. Tick the aforementioned pandemic positive category boxes and couple them with a footing in the Asian – see China – market, and we’re likely to see a very busy 2021. 


  1. Good article. Thanks. Maybe there could be a follow-up with M&A activity on beauty care suppliers, like the big news of Croda acquiring Iberchem?

    • Nice to see you here Kevin! I hope you are well? Agreed this was a good read and a nice summary of the events over the past year with the M&A in the industry.


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