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Beauty M&A Possibilities Abound, According to Kline

Posted: April 22, 2013

Putting on its best face, the U.S. cosmetics and toiletries market continues to perform well, posting 3.4% growth in 2012, with sales signifying success for both key and niche industry players, according to the recently published Cosmetics & Toiletries USA report by global consulting and research firm Kline & Company. However, it is at the macro level that the flourishing beauty market is offering the most promise.

Procter & Gamble (P&G) maintains its lead in the U.S. personal care market; however, its market share across multiple categories is being challenged. With the exception of P&G, major companies—in particular, L'Oréal and Estée Lauder—are enjoying steady growth. Of particular note, smaller companies are making strong headway and highly viable impressions.

Within the presently fertile M&A climate, smaller companies are increasingly attractive acquisition prospects by larger, cashed-up, and savvy players. As a telling example, earlier this year, L’Oréal’s CEO Jean-Paul Agon announced that he was ready to make important acquisitions to maintain growth, and this has already been borne out by the recent acquisition of Interconsumer Products, one of Kenya’s largest manufacturers of personal care and beauty products.

Eric Vogelsberg, senior vice president at Kline’s M&A Advisory, remarked, “Clearly, companies continue to emphasize growth agendas and make significant funding available—both strategic and financial sponsors—to realize such aspirations. Such an improving environment is increasingly attractive for M&A and a growing number of smaller, often privately held, cosmetic and toiletry companies are contemplating, developing, and/or executing exits. As such, 2013 portends to offer even greater deal flow as many companies look to invest in new growth opportunities.”

Kline’s minor companies chapter from the Cosmetics & Toiletries USA report, consisting of almost 150 profiles of smaller and especially dynamic cosmetic and toiletry companies, reveals particularly promising companies that have been identified as positive net-value prospects and are also presently competing in segments that are expected to post higher-than-industry-average growth. < ahref="http://www.gcimagazine.com/business/marketers/acquisitions/Beauty-Industry-Acquisition-Targets-Identified-by-Kline-202527211.html" target="_blank">Read more about those prospects here.

In terms of the overall cosmetics and toiletries market performance, the nail polishes category claims the most success, shining with 17.4% growth, fueled by continual innovation and high consumer demand. Additionally, skin care products for men show a strong performance in 2012, gaining formidable traction with innovative brands such as Lab Series Skincare for Men by Estée Lauder and Anthony Logistics For Men by Anthony Brands, performing exceptionally well and posting double-digit growth.