Demeter Group, a boutique investment bank based in San Francisco, is fortifying its ranks as mergers and acquisition activity heats up in the beauty industry.

This story first appeared in the May 21, 2010 issue of WWD. Subscribe Today.

On May 10, Michelle Cherrick joined the firm as chief executive officer, said Demeter Group’s founder, Jeff Menashe, who cleared the path to the ceo post by assuming the role of chairman.

The seven-year-old firm specializes in the beauty, food, beverage and apparel industries. Cherrick, who has 17 years of experience in consumer investment banking, brings expertise in e-commerce, restaurants and specialty retail, where she has represented the hybrid beauty retailer Ulta. Cherrick has helped consumer companies raise nearly $15 billion of public and private equity capital and has completed mergers and acquisitions totaling more than $5 billion in value. Cherrick began her career at Goldman Sachs and joins Demeter Group from Thomas Weisel Partners.

At Demeter Group, Cherrick said she is on the lookout for beauty companies that are “family run, founder led” to assist them in obtaining additional capital and resources and, later, advise them on transactions, including the potential sales of their businesses.

“We are looking for game changers with capabilities that allow them to capture a disproportionate share of market,” said Cherrick, adding the aim is to expand their businesses into multiple categories and multiple countries.

Cherrick said currently niche or specialty beauty brands are garnering the most interest in the market. The size of recent beauty deals range widely, she cautioned, but noted many are returning to prerecession levels.

Jani Friedman, a managing director at Demeter Group, said beauty deals for “game-changing brands or concepts” currently are in the range of roughly two times revenue or 10 times earnings before interest, taxes, depreciation and amortization. Recently, Demeter Group has advised Urban Decay and Clorox/Burt’s Bees.

Friedman joined the firm three years ago from Sephora, where she was vice president and divisional merchandise manager of skin care and hair care.

Menashe, referring to Friedman’s role at the firm, said: “We can bring intellectual horsepower to the early stages of the process.” He later added, “We are looking for a thoughtful way to maximize their company and the brand.”

Drawing a distinction between large Wall Street banks and Demeter Group, Menashe said: “Full-service banks are product specialists. We are industry specialists.”

Cherrick added, “Our message is ‘simple elegance.’ We are not trying to sell companies additional products and services. We are very much purists.”

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