By  on May 17, 2018

Makeup brand Milani has scored a majority investment from private equity firm Gryphon Investors.As part of the deal, prestige beauty veteran Michelle Taylor will become interim chief executive officer. She is an executive adviser to Gryphon. Before that, she was chief executive officer of Kate Somerville Skin Care. Taylor has also worked for Kiehl's, Lancôme, L'Oréal USA, Chanel and Elizabeth Arden. While Taylor is on board for now, the business is on the hunt for a permanent ceo.Terms of the transaction were not disclosed, but industry sources estimated the deal is valued between $450 million and $500 million. Milani is said to have about $105 million in sales and around $40 million in earnings before interest, taxes and depreciation and amortization.Beauty has been an M&A hotspot over the past few years, but deals in mass or masstige have been less frequent than transactions for prestige beauty brands. In 2014, L'Oréal acquired NYX, which is in the same competitive set as Milani according to Tribe Dynamics. Other masstige investments include the Estée Lauder Cos. investment in Deciem, maker of The Ordinary, and Winky Lux's capital raise from Finn Capital, Ride Ventures and other investors."To me, at the end of the day, consumers want the same end benefit, and why should quality product be only limited to prestige?" Taylor said. "When you look at an Ulta format or even a lot of the brands that Sephora's bringing in, or the breadth of assortment that's available digitally, there's a real democratization of beauty."Milani, which is comprised of both the Milani and Jordana brands, makes makeup that sits in the masstige category. Milani is known for products like its Conceal and Perfect Foundation, which launched in 2016, and being among first to mass with matte liquid lipstick. Milani overindexes in multicultural, Millennial and Gen Z shoppers.In the past few years, the Los Angeles-based brand has expanded its business in Wal-Mart, where it is in nearly 3,000 doors, at Target, where it will be in 1,000 doors by the end of the year, at Walgreens and at Ulta Beauty, where it recently launched. Milani is also sold in more than 50 countries, including cross-border into China.According to brother-and-sister team Ralph Bijou and Laurie Minc, who have been running Milani for the past 32 years, the Gryphon deal will help the business expand."It's all about the growth of the brand and the potential to make it a really great global brand," Bijou said. "We needed some expertise and some muscle, if you will, to do that." Bijou and Minc retain a "significant minority" position in the business, and will be on the board going forward. Minc will be a senior advisor to Milani, and Bijou will be president of Jordana, which will be "getting a makeover," he said.Jordana, which was founded in 1986, will be getting and update, according to Bijou. "It's been an opening price point, Made in the USA brand since 1986," he said. "The brand positioning will change a little bit — that's what we're working on now with data and marketing people."The duo bought and relaunched Milani in 2001. The brand uses makeup manufacturers in the U.S. and Italy for its cosmetics range, which includes face, lip and eye products, and uses customized components in its packaging. "We don't manufacture anything," Minc said. "We use top-notch contract partners that do similar products for very prestige brands."Minc said the pivotal moment for Milani's growth was when the brand's buyer at Walmart saw it as something that could sell above the store's traditional $10 price cap. "At a certain point, our buyer recognized Milani had legs to cross over into masstige, and to be the masstige brand for their store," Minc said. "She allowed us to do an eyeshadow kit that reached beyond that [price] point."That masstige positioning is one of the reasons Gryphon was interested in the deal, according to Matt Farron, principal at Gryphon. Taylor added that during the diligence processes she and the firm surveyed customers and found that it was perceived as prestige."[Milani's] growth in Ulta, which is over their expectations, together with our strength in digital and e-commerce sales is just one more reflection and data point on how customers are mixing masstige and prestige products together, and we're only going to see that more and more going forward," Taylor said.Milani is Gryphon's first real beauty deal. The firm made a move into personal care with a deal for C.B. Fleet Co., owner of Summer's Eve in 2014, which it sold to Prestige Brands Holdings Inc. in 2016 for $825 million. The firm is said to have a more than 50 percent internal rate of return on consumer products investments. "It was a natural evolution," Farron said. "In 2016, we formalized our interest in the space [and partnered] with Michelle to start to look at things in beauty."In her first few months on the job, Taylor said she plans to focus on infusing that formula quality messaging into the brand's DNA. The brand will also focus on new product development, refining positioning, going deeper in existing retail accounts and accelerating digital and social, Taylor said.Moelis advised Milani on the transaction, and Financo advised Gryphon.

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