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."
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