By Allison Collins
with contributions from Jennifer Weil
 on January 11, 2017
CeraVe products.

The new year hasn’t slowed the beauty deal juggernaut.

In a 48-hour span this week, L’Oréal agreed to spend $1.3 billion to buy three skin-care brands from Valeant; Coty Inc. revealed a deal to acquire a majority stake in direct-to-consumer brand Younique for $600 million, and private equity firm Main Post Partners made an undisclosed investment in Milk Makeup.

The deals underscore financial expert predictions for beauty acquisitions in 2017 — mainly, that they’re not going to stop.

At L’Oréal, the $1.3 billion purchase of CeraVe, AcneFree and Ambi should build up the company’s Active Cosmetics Division, which also includes SkinCeuticals, La Roche-Posay and Vichy and focuses on products created with and endorsed by dermatologists, pediatricians and other physicians. The new trio of labels — with their respective focuses on dry skin, acne and dark spots and brightening — generates yearly revenue of about $168 million combined and puts L’Oréal head-to-head with Nestlé’s blockbuster Cetaphil brand.

The deal follows a handful of other acquisitions that L’Oréal revealed in 2016 — including the $1.2 billion purchase of It Cosmetics, an offer to buy Société des Thermes de Saint-Gervais-les-Bains and the license to use the Saint-Gervais Mont-Blanc beauty brand. In June, L’Oréal signed an agreement to purchase Atelier Cologne.

L’Oréal is paying a 7.7-times sales multiple for the three U.S. skin-care labels, which is a higher than the 6.1-times sales it paid for IT Cosmetics.

Even at that multiple, analysts seemed to like the deal.

“The acquisition will almost double the size of L’Oréal’s Active Cosmetics Division in the U.S. — a market where the group is still relatively under-represented, given the lack of its natural distribution platform — pharmacies, for instance,” said Eva Quiroga, an analyst at Deutsche Bank. “Although the price is very high, it is supported by the strong growth the business will likely achieve, initially in the U.S., where there is still a lot of white space to be covered and eventually on a more global basis. It is this kind of global expansion that L’Oréal has historically excelled at — think Kiehl’s, Maybelline and now NYX.”

“These will complement L’Oréal’s active skin-care portfolio with brands that are positioned more in the ‘accessible price segments,’ distributed in mass channels, drugstores, beauty stores and online,” wrote Céline Pannuti, an analyst at J.P. Morgan Cazenove, in a research note.

“We believe CeraVe has great potential for international growth in the years to come,” specified Brigitte Liberman, president of L’Oréal Active Cosmetics Division, in a statement.

Over at Coty, which is fresh off the $11.4 billion purchase of Procter & Gamble’s specialty beauty portfolio, Younique adds a different kind of business to the portfolio. The Utah-based company makes its own prestige line of skin care, body care and makeup products that are sold via peer-to-peer social selling, which takes place during virtual Tupperware-like parties — but for Younique products — hosted by the business’ sales force, called independent presenters.) The events are put on using Younique’s technology platform, which specializes in mobile-first e-commerce.

Younique has about 200,000 presenters and is projecting about $400 million in net revenues for 2016. Under Coty, Younique will operate as a stand-alone business within the Consumer Beauty Division, with sibling founders Derek Maxfield and Melanie Huscroft remaining on board — Maxfield as chief executive officer and Huscroft as chief visionary officer.

Going forward, Coty’s plan for Younique includes further global expansion. The brand is in 10 countries: the U.S., U.K., Canada, Australia, New Zealand, Germany, Mexico, France, Spain and Hong Kong.

“Derek and Melanie are tremendous entrepreneurs who have built one of the most engaging and fastest-growing e-commerce companies in beauty,” said Camillo Pane, Coty ceo. “Alongside the rest of Younique’s team and in partnership with their presenters, they have been able to impact the lives of millions of consumers across a number of countries with a mission to uplift and empower women. We look forward to working with them to continue supporting the mission and building Younique into a leading global e-commerce beauty company.”

For Coty, the deal continues a buying spree that included the P&G portfolio, professional hair tools brand GHD for about $510 million, Brazil-based Hypermarcas for about $1 billion and Beamly, a digital marketing agency.

Milk Makeup is also expecting to achieve growth through its recent deal — an investment from private equity firm Main Post Partners, which backed Too Faced when it was just a $40 million brand. Main Post sold Too Face, now doing about $270 million in sales, to General Atlantic in 2015, which just sold it to Estée Lauder for $1.45 billion.

Main Post’s undisclosed minority investment should help Milk expand geographically, starting with Sephora Canada in spring 2017. Right now, the brand is sold in about 200 doors total, including Sephora and Urban Outfitters doors and through Birchbox. Industry sources estimated the brand is approaching $10 million in net sales, doubled in size in 2016, and is expected to double again in 2017. Franchise and shade extensions will also come as a result of the new investment, Rassi said.

Milk focuses on launching products in easy-to-transport tubes and stick

Milk Makeup

Milk Makeup 

form. The company’s hero products include Cooling Water Stick, a $24 caffeinated hydration stick; Lip Color, $22; Highlighter, $24; Ubame Mascara, $24, and Matte Bronzer, $24.

“Our girl and guy changes their look from day to night in the back of a taxicab in five minutes,” said Mazdack Rassi, who cofounded the brand with Dianna Ruth, Georgie Greville and Zanna Roberts Rassi.

That whole concept of “living the look” is one that resonated with Main Post, according to partner Jeff Mills said. “It’s more about what you’re doing than what you look like and taking a selfie and broadcasting yourself,” he said. “It’s more about the life that you’re living and what you’re able to do when you feel great and when you put yourself in a position where you’re highlighting your own individuality.”

The idea is a shift away from the heavily contoured, highlighted, virtually perfected looks popular with the vlogging community. “It’s definitely zagging when other people are zigging,” Mills said. And while the Main Post team doesn’t fancy itself “trend pickers,” the deviation in Milk’s mission was one they found attractive.

“We see this Milk Girl as this creative, entrepreneurial, tech-savvy individual and many of them don’t want that look that’s out there on YouTube, they want a more minimalistic look,”  said Josh McDowell, Main Post managing partner.

All three transactions come after several major deals in beauty last year. On top of those mentioned earlier, 2016 saw the Carlyle Group sell Vogue Partners, which includes hair-care brand OGX, to Johnson & Johnson for $3.3 billion; Lauder buying Becca Cosmetics for about $230 million, in addition to Too Faced, and Shiseido picking up Laura Mercier, ReVive and the Dolce & Gabbana fragrance license.

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