Kate Somerville, who founded her eponymous skin care business three years ago, has agreed to a 50-50 corporate merger with San Francisco private equity firm JH Partners.
JH purchased the stake of founding Kate Somerville investors Kim and Doyle Rose for an undisclosed amount. JH now owns half of the Kate Somerville skin care brand.
Somerville owns the other half, and will become chief executive officer and chairman of a five-member board that includes one yet-to-be-determined executive from JH.
"It has been a big roller- coaster from the get-go. I was courted by four different companies. I was looking for someone that really understood my brand and understood my vision. Out of everyone, they got it," said Somerville, who declined to name the competing companies. "You rarely hear about JH Partners. They let the brands do what they do. They are behind the scenes and really strategic, and they understand my market."
To execute her vision, Somerville wanted to retain her namesake three-year-old skin care clinic in West Hollywood, Calif., on Melrose Place; a prestige product line launched last November, and technologies such as DermaLucent, which uses light to treat skin conditions. Unlike JH, some potential buyers argued that the clinic should be sidelined, the products should be mass marketed or that Somerville's role should be relegated to creative director.
"This business is like my baby. With a lot of the others, it felt like they were taking complete control or they had a different vision from me because of their experience," said Somerville, 37. "JH Partners is very open to the founder. I felt that flexibility."
John Hansen, president of JH, explained that the firm typically gets involved with companies that have charismatic leaders, are willing to work with JH for long periods and generate less than $50 million in revenues — but could possibly multiply their yearly take several times over. Kate Somerville is expected to generate $8 million in product sales and around $4 million at its clinic this year, and Hansen predicted it would double in size in each of the next few years.
"I love the beauty space because we know it well. We think we know how to build a brand effectively, and we know how to build growth and manage for growth," said Hansen. "She [Somerville] is attacking a part of the market that is growing nicely. The products are differentiated, they are proven at her medi-spa and she is motivated and enthusiastic."The JH beauty stable also features Australian skin care brand Jurlique and oral care line Go Smile, but the firm made its name in the beauty industry with Bare Escentuals. JH initially invested in Bare Escentuals more than 15 years ago, long before mineral makeup was a hot commodity, and helped take the company public last year.
"He [Hansen] was really a huge part of making this brand successful. Any beauty brand will benefit from his brilliance in this area," said Leslie Blodgett, ceo of Bare Escentuals. "In the early days, we were a retailer, and I brought the brand to QVC. He saw that we could sell makeup on television, which was highly unusual, and infomercials had a really bad reputation at the time."
Although Somerville is not planning to mimic Bare Escentuals' path to growth, she is impressed by what JH accomplished with the makeup brand and will use similar marketing and distribution concepts. Somerville said her first infomercial should hit the airwaves in a year to 14 months, and she is busy choosing one or more celebrities to foster brand awareness.
In late summer, Kate Somerville will release a four-item acne line. Throughout the year, best-selling products will be highlighted on QVC every four weeks during minutes-long segments, and an hour show is tentatively scheduled for January. In about six months, the Kate Somerville brand will introduce exclusively on QVC at-home handheld devices for antiaging and acne before the devices become available at selected retailers and spas.
In the brick-and-mortar business, Somerville is hashing out a deal to enter a luxury department store chain. Until now, she has stuck to outfitting doctors' offices and spas with her technologies and products, and is expanding that distribution soon with marquee properties, including Canyon Ranch and the Beverly Wilshire Four Seasons. In the future, she said New York could be home to another Kate Somerville skin care clinic, and branded Kate Somerville stores could round out the brand's distribution.
"There were plenty of opportunities to find capital. From their philosophies of where the brand should go and what distribution channels we should take, it was the best fit," said Rose, the former ceo of Kate Somerville, of the association with JH. "The model that JH used with Bare Escentuals seems to make a lot of sense with Kate, and that is what sold us on JH."
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