Private equity firm Yellow Wood Partners has closed a $370 million fund.
The firm intends to look at doing deals in the beauty and personal-care space, according to managing partner Dana Schmaltz. The fund, called Yellow Wood Capital Partners II LP, intends to partner with management teams in the consumer sector to grow brands and diversify their product offerings. Outside of beauty, the firm looks at the health and wellness, household, food and beverage, and pet-care categories.
Yellow Wood said it would invest between $50 million and $150 million per deal. The firm plans to buy four to five platform acquisitions, which will likely be built up through add-on deals.
The fund closing comes on the heels of Yellow Wood’s sale of PDC Brands to CVC Capital Partners for $1.425 billion. PDC is comprised of brands such as Dr. Teal’s, Eylure and Cantu.
The PE firm executed a buy-and-build strategy for that business, making a series of add-on acquisitions that contributed to the business growth. Under Yellow Wood, PDC grew to do $430 million in sales for 2016, with $110 million in earnings before interest, taxes, depreciation and amortization. Before it was sold, the company expanded its international distribution to make up about 25 percent of its overall business.
It’s a move Yellow Wood would replicate for future deals, according to Schmaltz. The fund size allows the firm to “buy a bigger company with $50 million in EBITDA, but also buy smaller, growing brands from entrepreneurs with $7.5 million to $10 million in EBITDA and then do what we did with PDC — grow organically, domestically and internationally,” Schmaltz said.
“We have looked at prestige [beauty] and gotten close on a couple things, but our real bread and butter is the mass market,” Schmaltz said. “Across the mass market, you’ve got different retailers in different formats, but they’re all competing for the same consumer dollar, and they do it differently…when we see something working in one channel, we think we can help that brand expand in other distribution channels.”
While Yellow Wood generally takes majority positions, Schmaltz said the firm would consider minority deals. “We haven’t done any minority transactions, but we don’t rule them out,” he said. “That being said, our model is set up on bringing a lot of operational expertise to these brands…[which] is easier in a majority deal.”